Japan’s Nikkei 225 Drops for Fourth Day on Europe Concern

Feb. 9 (Bloomberg) -- Japanese stocks fell, driving the Nikkei 225 Stock Average down for a fourth day, on renewed concern ballooning budget deficits will worsen Europe’s economy.

Nintendo Co., a game maker that gets 34 percent of its sales in Europe, fell 1.1 percent. Lens maker Hoya Corp. sank 1.8 percent after reporting a drop in earnings. Koito Industries Ltd., the Japanese supplier of seats used in Airbus SAS and Boeing Co. planes, tumbled 33 percent after saying it will repair almost 150,000 seats. Sumitomo Mitsui Financial Group Inc. jumped 2.1 percent after posting higher-than-estimated earnings.

“Some European nations will have to reduce their spending, which will keep their economies sluggish for the mid- to long- term,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees about $96 billion. “Without an upside catalyst, the market remains bearish.”

The Nikkei 225 lost 0.2 percent to close at 9,932.90 in Tokyo, while the broader Topix index also fell 0.2 percent to 881.57. The gauges pared losses as the yen weakened against the euro and dollar.

The Nikkei sank to as low as 9,867.39, compared with this year’s high of 10,982.10 reached on Jan. 15. A 10 percent decline from a recent peak, which is a so-called correction, occurred even when some investors and strategists expected Japanese shares to outperform overseas peers in 2010. Topix- listed companies are estimated to post a 67 percent jump in earnings per share on average in the year starting April 1, the second-highest forecast globally after Ukraine, according to data compiled by Bloomberg.

‘Somebody’s Purse’

Tsutomu Fujita, chief strategist for Japanese equities at Citigroup Inc., said on Feb. 2 that the Topix will climb 20 percent this year, outperforming a gain of 15 percent in European shares and 5 percent in the U.S.

Credit-default swaps, or the cost of insuring against losses on sovereign debt, for Spain and Portugal jumped to a record, according to CMA DataVision. Those for Greece also hovered around an all-time high. The costs were driven up by concern those nations’ governments will not be able to impose spending cuts to reduce budget deficits.

Nintendo, the maker of the Wii game machine, fell 1.1 percent to 24,040 yen in Osaka trading.

“People are saying investors are selling some assets to avoid risk in the face of Europe’s fiscal problems,” said Daiwa Asset’s Nagano. “But we can’t sneak a look at somebody’s purse, so how the issue is affecting investors is hard to measure.”

Banks, Carmakers

Hoya, Japan’s biggest maker of eyeglass lenses, slipped 1.8 percent to 2,274 yen. The company today said net income dropped by half in the nine months ended Dec. 31, citing a decline in orders and a stronger yen.

Koito Industries plunged by a record 33 percent to 159 yen. The Cologne-based European Aviation Safety Agency said last year the Yokohama-based company was not a trustworthy manufacturer and wasn’t sharing enough information with European clients.

Sumitomo Mitsui, Japan’s second-biggest bank by market value, climbed 2.1 percent to 2,831 yen and was the second- biggest positive contributor to the Topix after Toyota Motor Corp. Third-quarter net income exceeded the median estimate of six analysts surveyed by Bloomberg as losses on shareholdings and bad-loan charges declined.

Toyota, the world’s biggest automaker, jumped 2.9 percent, sending a gauge of carmakers to the biggest gain among the Topix’s 33 industry groups, even after the nation’s Transport Ministry said Toyota will recall some models.

Drugmakers Drag

The yen depreciated to 122.68 per euro from 121.85 at 9 a.m. while weakening to 89.47 per dollar from 89.24 on speculation European officials will agree to assist Greece in tackling its deficit. A European Central Bank spokesman said President Jean- Claude Trichet would leave Sydney a day earlier to attend a gathering of European Union leaders. A weaker yen boosts the value of overseas revenue at Japanese companies when converted into their home currency.

Drugmakers, which was the third-best performing group in the Topix from Jan. 15 to yesterday, were the heaviest drag on the index today. Automakers had posted the biggest drop during the period.

With stocks in the Topix trading at 1.1 times book value, “shares have been sold to the level where there is little room for further decline,” said Masanori Ikunaga, who helps manage the equivalent of $112 billion at Tokyo-based Sumitomo Mitsui Asset Management Co. “Investors are expecting the market to soon rebound and replaced defensive shares with stocks that are more sensitive to a move in the broader market.”

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.