Nov. 17 (Bloomberg) -- Japanese stocks fell as the dollar weakened to a five-week low against the yen, sales of new equity threatened to dilute earnings per share and brokerages cut investment ratings.

Hitachi Ltd., a maker of electronics and nuclear reactors, lost 2.6 percent, extending a decline yesterday after saying it will sell stock and bonds. Daiwabo Holdings Co. plummeted 21 percent, the most in at least 35 years, following its plan to sell shares. Toshiba Corp. and Sanyo Electric Co. declined more than 4 percent after the dollar weakened. Konica Minolta Holdings Inc. tumbled 5.3 percent after Mizuho Securities Co. cut its rating on the electronics company.

“Japan is lagging behind other stock markets because of an increasing supply of shares and the stronger yen,” said Yoshihiko Tabei, senior analyst at Kazaka Securities Co. in Tokyo. “Japan’s company earnings may decline next fiscal year if the yen hurts exporters.”

The Nikkei 225 Stock Average dropped 0.6 percent to 9,729.93 at the 3 p.m. close in Tokyo. The broader Topix index fell for a fifth day, losing 0.4 percent to 857.00, with more than three stocks declining for each that advanced.

Today’s drop dragged the Topix to a 0.3 percent retreat this year, the only decline among the world’s 40 largest equity markets, according to data compiled by Bloomberg. That compares with increases of 23 percent for the Standard & Poor’s 500 Index in the U.S. and 27 percent for the Dow Jones Stoxx 600 Index in Europe. The global recession has sapped demand for Japanese companies’ products and the stronger yen has hurt exporters.

Economy, Yen

Japanese Prime Minister Yukio Hatoyama said over the weekend at a meeting of Asia-Pacific leaders in Singapore that the economy remains “worrisome.”

The yen appreciated to as much as 88.76 against the dollar yesterday in New York, the strongest level since Oct. 9. That threatens to erode earnings at Japanese companies when overseas revenue is converted into their home currency.

Electronics makers were the biggest drag on the Topix among the index’s 33 industry groups. Toshiba, which gets more than half of its revenue from abroad, lost 4.6 percent to 457 yen, the lowest in six weeks. Sanyo Electric, which earns 60 percent of its sales overseas, retreated 4.1 percent to 162 yen, the lowest since May 1.

Hitachi lost 2.6 percent to 262 yen, extending a decline of 8.5 percent yesterday, when a filing showed the maker of washing machines and nuclear reactors will raise as much as 418 billion yen ($4.7 billion) in stock and bonds.

Daiwabo Holdings plummeted 21 percent to 216 yen, the biggest slide among the 1,686 companies in the Topix and the steepest slump since at least September 1974. The fabric maker said it will raise as much as 11.8 billion yen from selling new shares to repay debt.

Konica Minolta, a maker of film used in liquid-crystal displays, lost 5.3 percent to 836 yen after Ryosuke Katsura, an analyst at Mizuho Securities, cut the stock’s rating to “neutral” from “outperform.”

Sapporo Holdings Ltd., Japan’s fourth-largest brewer, dropped 2.6 percent to 443 yen after Mizuho Securities’s Hiroshi Saji cut the shares to “underperform” from “outperform.”

To contact the reporter for this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

Last Updated: November 17, 2009 02:09 EST