Feb. 23 (Bloomberg) -- Japanese stocks dropped, led by exporters such as Nissan Motor Co. and Bridgestone Corp., after oil prices rose above $51 a barrel, spurring concern that rising energy costs will dent global economic growth and earnings.

Stock benchmarks also fell after a government report showed Japan's export growth slowed in January, suggesting that overseas demand may not be strong enough to pull the world's second-largest economy out of recession.

``The slowdown in the global economy that began last year was mainly due to rising oil prices and that fear is now back to haunt the market,'' said Jun Terasaka, who helps manage the equivalent of $9.6 billion as a fund manager at Toyota Asset Management Co. in Tokyo. ``Stocks are bound to slump further.''

JFE Holdings Inc. led losses by steelmakers after agreeing to pay Brazil's Cia. Vale do Rio Doce 71.5 percent more for iron ore starting April 1.

The Nikkei 225 Stock Average sank 117.47, or 1 percent, to 11,480.24 at 1:09 p.m. in Tokyo. The Topix index lost 10.65, or 0.9 percent, to 1151.84. All 33 industry groups that make up the Topix fell except for those tracking mining and oil-related shares.

Nikkei 225 futures for March delivery slipped 1 percent to 11,480 in Osaka and slid 0.9 percent to 11,475 in Singapore.

The surge in oil prices has contributed to the Nikkei's retreat from its highest since July, reached on Feb. 18, on concern rising material costs will damp growth in Japan, which imports almost all of its oil. The Nikkei has fallen 1.5 percent this week as oil prices jumped more than 6 percent.

Some 709 billion yen ($6.8 billion) in shares included in the Topix traded, a third less than the daily average for the past three months. Stocks that fell outnumbered those that rose 1,131 to 329 on the Tokyo Stock Exchange's first section.

Higher Crude Prices

Nissan, Japan's second-biggest automaker, fell 16 yen, or 1.4 percent, to 1,113. Bridgestone, the world's second-biggest tiremaker, slumped 60 yen, or 2.9 percent, to 2,000.

Bridgestone last week said it expects materials costs to rise 60 billion yen in 2005 and forecast operating profit, or sales minus the cost of goods sold and administrative expenses, to drop 14 percent this year.

Higher crude prices may also dent consumer spending in the U.S., the world's largest consumer of oil. The crude contract for March delivery, which expired yesterday, surged 5.8 percent to $51.15 a barrel on the New York Mercantile Exchange, the highest closing price since Oct. 29, in the biggest one-day gain since June 1. The April contract traded above $51 a barrel in Asian trading as well.

`Double Whammy'

Exporters also fell as the dollar's tumble against the yen triggered concern that the value of their U.S. sales will shrink. The dollar had its biggest drop since Oct. 8 to 104.04 yen from 105.54 in New York and slumped to as low as 103.93 yen in Asian trading. The Japanese currency recently traded at 104.72.

``The combination of oil's jump and the dollar's slump is a double whammy for Japan,'' said Yutaka Miura, a market analyst at Shinko Securities Co. in Tokyo. ``This isn't the time to be betting on exporters and major technology stocks.''

Ricoh Co., Japan's No. 2 office-equipment maker, lost 26 yen, or 1.3 percent, to 1,930. The company expects the yen to average 107.67 per dollar for the business year. Matsushita Electric Industrial Co., the world's biggest maker of consumer electronics, declined 35 yen, or 2.2 percent, to 1,555.

A government report before the market opened showed exports grew 3.2 percent from a year earlier, compared with December's 8.8 percent gain.

Steelmakers

The Topix Iron & Steel Index was the second-worst performer after a measure tracking rubber products makers including Bridgestone. JFE Holdings, Japan's second-largest steelmaker, dropped 90 yen, or 2.9 percent, to 2,980. Nippon Steel Corp., the largest in the country, fell 6 yen, or 2.2 percent, to 271.

Nippon Steel and JFE Steel Corp. yesterday agreed to pay Vale do Rio Doce 71.5 percent more for iron ore, starting April 1, as they compete with mills in China for supplies. JFE's spokesman Hiroshi Okamato said higher prices of iron ore, coal, metal alloys and freight will add 250 billion yen to the company's costs in fiscal 2005.

``The question is whether these steelmakers can pass on the higher costs to end-users and that's the prime concern now for steelmakers,'' said Shinko's Miura.

Still, some investors expect drops in stock prices to be temporary.

Raise Steel Prices

``Iron ore is 20 percent of the cost of finished steel, so they only need to raise steel prices 14 percent to cover this,'' said Robert Howe, who oversees $6.5 billion in assets as a chief investment officer at AIG Global Investment Management Corp. in Tokyo. ``They already have, and will, raise prices further in April. But the market doesn't understand this, and will sell them anyway.''

The Topix Mining Index jumped 1.8 percent while the Oil & Coal Index added 0.2 percent as oil and gold prices surged. Prices for the precious metal in New York rose more than $7 an ounce to the highest this year as the dollar dropped, boosting gold's appeal as an alternative to U.S. assets.

Inpex Corp., Japan's largest oil explorer, jumped 15,000 yen, or 2.7 percent, to 566,000. Teikoku Oil Ltd., a Japanese oil and natural gas producer, advanced 19 yen, or 2.7 percent, to 733. The company last week said full-year profit increased 36 percent as oil prices gained. Sumitomo Metal Mining Co., Japan's top gold producer, climbed 13 yen, or 1.7 percent, to 771.

Best and Worst

Among the most active stocks, Pacific Metals Co. surged 41 yen, or 8.4 percent, to 527, set for its biggest gain since May 18. The ferronickel maker said it will pay its first dividend in 12 years in the fiscal year ending March 31. It was the second- most active stock by value, with 17.7 billion yen in shares changing hands.

Fanuc Ltd., Japan's largest industrial robotics makers, lost 180 yen, or 2.6 percent, to 6,750. Fujitsu Ltd., Fanuc's biggest shareholder, said it sold an additional 13 million shares the industrial robots maker today, after selling 9.85 million of shares yesterday. Fujitsu slipped 5 yen, or 0.7 percent, to 667.

``There might be some investors who are worried about having less influence from Fujitsu on Fanuc's earnings with the share sale,'' said Shigeo Kikuchi, equity manager, at Takagi Securities Co. in Tokyo.

Ito-Yokado Co., Japan's second-largest retailer by sales, slumped 182 yen, or 4.2 percent, to 4,140, after Goldman, Sachs & Co. lowered its rating on the stock, saying that the company's cut in its estimated profit was bigger than the brokerage's expectation.

The general merchandise chain store operator yesterday cut its full-year profit forecast 75 percent to reflect a drop in the value of assets and inventories and the cost of closing unprofitable stores. The stock also dropped as it traded without a dividend.

Haseko Corp., a condominium builder, plunged 27 yen, or 11 percent, to 217 after the company yesterday said it will sell 70 billion yen worth of preferred shares and doubled its full-year loss forecast.

To contact the reporter on this story: Tomoko Yamazaki in Tokyo at tyamazaki@bloomberg.net.

Last Updated: February 22, 2005 23:11 EST