Japanese Stocks Fall as Economic Growth Misses Estimates, U.S. Retail Data

Japanese stocks fell, sending the Nikkei 225 Stock Average to a six-week low, after economic growth missed estimates and U.S. retail sales increased less than expected.

Sony Corp., an electronics maker that gets 22 percent of sales in the U.S., sank 3 percent. Honda Motor Co., a carmaker that generates more than 80 percent of its revenue abroad, retreated 0.9 percent. JX Holdings Inc., Japan’s largest oil refiner and copper producer, dropped 3.2 percent as crude oil and metal prices slumped on Aug. 13.

“The Japanese economy is simply weak,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees about $104 billion. “We need to see some sort of catalyst to help investor sentiment recover, especially a good economic indicator from the U.S.”

The Nikkei fell 0.6 percent to 9,196.67 at the 3 p.m. close in Tokyo, the biggest drop among equity benchmarks in the Asia- Pacific region. The broader Topix index lost 0.3 percent to 828.63, with almost twice as many stocks declining as advancing.

The Nikkei has dropped 13 percent in 2010, the biggest slump among the world’s five-largest developed markets, as the yen near a 15-year high against the dollar threatens to crimp export earnings. Europe’s debt crisis, China’s measures to cool its property market and concern about the pace of U.S. economic expansion have also dented confidence in a global recovery.

The declines have cut the average price of stocks in the Nikkei to 16.5 times estimated earnings, the cheapest since December 2008, according to data compiled by Bloomberg.

Sony, Honda, Canon

Sony lost 3 percent to 2,535 yen, Honda dropped 0.9 percent to 2,765 yen. Fanuc Ltd., a maker of industrial robots that earns almost 80 percent of its revenue outside Japan, retreated 1.9 percent to 9,420 yen and Canon Inc., the world’s biggest maker of cameras, decreased 0.7 percent to 3,555 yen. They were the biggest drags on the Topix index.

Japan’s economy expanded at an annualized 0.4 percent pace in the three months ended June 30, the Cabinet Office said today. That was slower than all 19 estimates from economists surveyed by Bloomberg, the median of which was for 2.3 percent growth.

“The GDP figures showed economic activity, especially domestic consumption, is shrinking,” said Takero Inaizumi, head of equity research in Tokyo at Mizuho Investors Securities Co. “The market is pricing in further deterioration in the economy in the future because manufacturing will likely slump due to the expiration of stimulus measures.”

‘Way to Recovery’

The Standard & Poor’s 500 Index dropped 0.4 percent on Aug. 13 in the U.S. after a report from the Commerce Department showed retail purchases increased 0.4 percent in July, compared with economists’ estimates of a 0.5 percent gain. Excluding auto dealers and service stations, demand fell 0.1 percent.

“There’s a long way to go before we have a self-sustaining recovery in the economy,” said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities Co. “U.S. retail sales were pretty bad, except for gasoline.”

The yen appreciated to as much as 85.73 against the dollar today in Tokyo, compared with 86.07 at the close of stock trading on Aug. 16. It rose to a 15-year high of 84.73 last week. Against the euro, Japan’s currency climbed to 109.25 from 110.78. A stronger yen cuts overseas income at Japanese companies when converted into their home currency.

Yen Climbs

JPMorgan Chase & Co.’s chief strategist in Tokyo, Tohru Sasaki, boosted his forecast for the yen at the end of September to 80 per dollar from 90. The brokerage also said the Japanese currency will strengthen to 79 yen by the end of 2010.

The yen is on course for its strongest average annual level against the dollar since currencies began trading freely in 1971, averaging about 90 this year, according to data compiled by Bloomberg and based on each day’s closing level.

“It’s the worst pattern for the stock market -- that the yen rises while the economy slows down,” said Masanori Ikunaga, head of domestic stocks at Sumitomo Mitsui Asset Management Co.

Mining and oil companies fell the most among the Topix’s 33 industry groups. JX Holdings sank 3.2 percent to 454 yen. Inpex Corp., Japan’s largest oil-exploration company, lost 3.5 percent to 396,000 yen. Japan Petroleum Exploration Co. dropped 3.5 percent to 3,285 yen, the lowest close since March 2009. Mitsubishi Corp., the country’s biggest commodities trader, fell 1.1 percent to 1,836 yen.

Crude oil for September delivery declined 0.5 percent to $75.39 a barrel in New York on Aug. 13, the lowest closing price since July 12. The London Metal Exchange Index of six metals including copper and zinc lost 1.4 percent.

CSK Holdings Corp. tumbled 6.9 percent to 283 yen, the largest drop in the Nikkei. Daiwa Securities Group Inc. reduced its rating on the computer-services company to “neutral” from “buy.”

The Nikkei 225 has fallen 18.9 percent from an 18-month high on April 5. Some analysts consider a 20 percent drop from a recent high signals the beginning of a bear market. The gauge briefly crossed the threshold on Aug. 12.

To contact the reporters for this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net; Monami Yui in Tokyo at myui1@bloomberg.net.

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