Oct. 12 (Bloomberg) -- Japanese stocks fell after Goldman, Sachs & Co. said earnings at Nikon Corp. and other semiconductor- equipment makers will drop next year and Sony Corp.'s mobile- phone venture reported its first profit decline in two years.

Nikon dropped the most in almost two months and Dainippon Screen Manufacturing Co. tumbled by the most since May after Goldman slashed its ratings on both stocks to ``sell.'' Sony fell the most in a month after Sony Ericsson Mobile Communications Ltd. said third-quarter net income declined 10 percent.

``Earnings for tech companies may be peaking out this year,'' said Eiichiro Yoshimura, who helps oversee about $10 billion at Tokyo Marine Asset Management.

Fast Retailing Co. fell the most in nine months after Asia's biggest clothing retailer missed its full-year profit forecast as sales growth slowed at its Uniqlo casual clothing chain.

The Nikkei 225 Stock Average lost 127.81, or 0.7 percent, to 17,331.17. The broader Topix index dropped 18.04, or 1.1 percent, to 1,659.48.

For the week, the Nikkei added 1.6 percent, the fifth period of gains, the longest streak since December. The Topix gained 0.2 percent.

Most Asian stock markets declined on speculation China will raise interest rates as soon as today to cool the economy.

Nikon, the world's largest maker of machines that etch circuitry onto silicon wafers, lost 340 yen, or 8 percent, to 3,910, the biggest drop since Aug. 17. Dainippon Screen slumped 65 yen, or 8.6 percent, to 692, its steepest fall since May 15.

Shin Horie, an analyst at Goldman in Tokyo, lowered his recommendation on Nikon to ``sell'' from ``neutral'' and slashed Dainippon Screen, a maker of semiconductor manufacturing equipment, to ``sell'' from ``buy.''

Chip Equipment Makers

``Chipmakers can't help but cut costs and investment because of declining prices,'' said Yoshinori Nagano, who helps oversee about $70 billion at Daiwa Asset Management Co. in Tokyo. ``This is taking a toll on makers of chip manufacturing equipment.''

Horie also cut Tokyo Electron, the world's second-largest chip-equipment maker, to ``neutral'' from ``buy.'' The stock fell 90 yen, or 1.2 percent, to 7,300.

The analyst said he expects capital investment in chips to decrease by about 10 percent in 2008, which will likely lower sales and profits of semiconductor-equipment makers.

Sony slid 250 yen, or 4.3 percent, to 5,530, the biggest one-day drop since Sept. 10. Sony Ericsson, the world's fourth- largest maker of mobile phones, is a joint venture between Sony and Ericsson AB of Sweden.

Fast Retailing, the operator of Japan's Uniqlo casual clothing store chain, slumped 450 yen, or 6 percent, to 7,060, the biggest one-day decline since Jan. 12. Net income fell 21 percent to 31.8 billion yen ($271 million) in the 12 months ended Aug. 31, less than the July forecast of 36.9 billion yen, the retailer said yesterday after markets closed.

Nikkei futures expiring in December declined 1.1 percent to 17,340 in Osaka and lost 0.8 percent to 17,350 in Singapore.

The settlement price for Nikkei 225 options contracts for October delivery was set at 17,450.33. The settlement price, also known as the ``special quotation,'' is calculated after all stocks in the benchmark begin trading.

Dainippon Screen Manufacturing Co. (7735 JT)
Fast Retailing Co. (9983 JT)
Nikon Corp. (7731 JT)
Sony Corp. (6758 JT)
Tokyo Electron (8035 JT)

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

Last Updated: October 12, 2007 03:56 EDT