Shares of Yahoo Japan rose more than 12% in Tokyo to one-year high of 556 yen after the company announced a partnership with Alibaba. The deal comes at a time when Yahoo Japan’s parent company is planning to sell its entire stake in Alibaba. Under the terms of the deal, Alibaba and Yahoo Japan will work together to promote sales of Japanese goods in China via Tmall and Tmall Global.
Japanese goods are popular in China
The duo will be offering support and lower fees for Japanese merchants looking to set up shops on Alibaba platforms, reports Bloomberg. Japanese products are gaining popularity in China, which is going to help Japanese sellers. The two companies have SoftBank has a common shareholder. The Japanese telecom and Internet conglomerate owns 43% in Yahoo Japan and 32% of Alibaba.
Yahoo Japan is the largest search engine in the country, and one of the two biggest e-commerce firms, the other being Rakuten. Rakuten had also tried to enter the Chinese e-commerce market, but failed to gain a foothold. By partnering with Alibaba, Yahoo Japan will get instant access to Alibaba’s hundreds of millions of users, plus Alipay.
The tie-up seems to be well-timed. Devaluation of the yen has made Japanese goods cheaper in China. Beijing has also announced to slash import tariffs on certain consumer goods, which is going to benefit Japanese companies.
Is Alibaba looking to pick up a stake in Yahoo Japan?
However, the 12% rally in Yahoo Japan stock seems to be an over-reaction. Jefferies analyst Hiroko Sato says the deal will have little impact on Yahoo Japan’s earnings this year.
The euphoric reaction suggests that investors hope to see an even closer partnership between Yahoo Japan and Alibaba. As the U.S.-based Yahoo is looking to exit its stake in Yahoo Japan, investors hope that Alibaba may pick up a stake. SoftBank seems reluctant to buy Yahoo’s stake in Yahoo Japan because it has a lot of other priorities, including turning around Sprint.
Alibaba shares fell 0.70% to $90.31 at 10:12 AM EDT on Friday.