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Japan's Stocks Tumble as Nikkei Enters Bear Market on U.S. Concerns, Yen

Japanese stocks fell, dragging the Nikkei 225 Stock Average into a bear market before an industry report that may show U.S. sales of existing homes plummeted in July, and as the yen strengthened.

Sony Corp., which gets almost 70 percent of its revenue abroad, lost 3.7 percent. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank by market value, fell 1 percent. Softbank Corp., Japan’s only provider of Apple Inc.’s iPhone, declined 1.8 percent after Japan Communications Inc. said it will offer chips that let the smartphone access another network. Daiichi Sankyo Co. led pharmaceutical companies higher as investors sought a refuge in stocks whose earnings are sheltered from the economic cycle.

“Even though we don’t think the U.S. is moving into a recession, there are concerns about a double dip,” said Kenji Sekiguchi, general manager of strategic research and investment at Mitsubishi UFJ Asset Management Co., which oversees about $73 billion in Tokyo. “The yen is the biggest worry for Japan, and unless we see policies on this, stocks will continue losses.”

The Nikkei 225 Stock Average dropped 1.3 percent to 8,995.14 in Tokyo, its lowest close since May 2009. The gauge is more than 20 percent below its 18-month high on April 5, the level some analysts regard as a bear market. The broader Topix index declined 0.9 percent to 817.73, with about two stocks retreating for each that rose.

The Nikkei has fallen 15 percent this year, the most among benchmark indexes in the world’s five-largest developed countries, as the yen strengthened and concern grew about slowing growth in China, Europe and the U.S.

U.S. Home Sales

The measure’s decline has cut the average price of stocks in the gauge to 16 times estimated earnings, close to the lowest level since December 2008.

Futures on the Standard & Poor’s 500 Index declined 0.4 percent. Yesterday, the gauge slumped 0.4 percent in New York as speculation the economy will slip into another recession offset investor optimism amid more than $1 trillion in takeovers this year.

Sony, the world’s No. 3 television maker, slumped 3.7 percent to 2,406 yen, the biggest contributor to the Topix index’s decline. Canon Inc., which receives 82 percent of its revenue from outside Japan, slipped 0.9 percent to 3,520.

Yen, New Homes

A report today by the Chicago-based National Association of Realtors will show U.S. July sales of existing homes plummeted 12.9 percent from June, the biggest monthly loss of 2010, according to the median estimate of economists surveyed by Bloomberg.

New-home sales, which account for less than a 10th of U.S. housing transactions, stayed at the second-lowest level on record last month, economists predict Commerce Department data will show tomorrow.

“The market is expecting the U.S. housing data to show bad results,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “And as concern about the U.S. economy grows and the yen continues strengthening, investors are having to wait on the sidelines.”

The yen rose to as much as 84.86 against the dollar today in Tokyo from 85.37 at the close of stock trading yesterday. Against the euro, the yen climbed to as much as 107.22 from 108.51. A stronger yen reduces overseas income at Japanese companies when converted into their home currency.

Softbank, NTT DoCoMo

The yen climbed to a 15-year high against the dollar this month and is on course for its strongest annual average level since currencies began trading freely in 1971, according to data compiled by Bloomberg and based on each day’s close.

“In Japan, the policy makers do nothing, and as the yen continues to strengthen against the dollar and the euro, there seems to be no end to the slap in the face of exporters,” said Tsutomu Yamada, a market analyst at kabu.com Securities Co. in Tokyo.

Softbank Corp. lost 1.8 percent to 2,423 yen. Japan Communications Inc., which provides mobile phone services, will offer a Subscriber Identity Module, a chip that allows unlocked iPhone 4s to use NTT DoCoMo Inc.’s network, the company said yesterday before the stock market close in Tokyo. NTT DoCoMo climbed 0.1 percent to 142,200 yen.

Pharmaceuticals Gain

The Topix Pharmaceutical Index increased 1 percent, the biggest gain of only three groups that rose today among the Topix’s 33 industry gauges.

“Amid insecurity about the growth of the global economy, investors are unwilling to buy exporters and cyclical stocks,” said Yumi Nishimura, an equity-market analyst at Daiwa Securities SMBC Co. “Investment funds are flowing into defensive stocks, such as pharmaceutical shares.”

Daiichi Sankyo Co., Japan’s third-largest drugmaker, climbed 2.4 percent to 1,678 yen. Eisai Co. increased 1.5 percent to 3,055 yen. Astellas Pharma Inc., Japan’s second- biggest drugmaker, rose 0.7 percent to 2,904 yen. The stock was raised to “outperform” from “neutral” by Credit Suisse Group.

Japanese stocks briefly pared declines in the afternoon session after a Citigroup Inc. report said slowing global growth will likely lead the Chinese central bank to keep its interest rates low. The Topix was down only 0.4 percent at 12:41 p.m. after dropping as much as 1.3 percent in the morning.

China Rises

Fanuc Ltd., an industrial robot maker that receives almost half of its revenue from Asia, rose as much as 0.3 percent. It fell 1.2 percent to 9,250 yen at the close of stock trading. Hitachi Construction Machinery Co., which counts China as its biggest market, pared declines to 0.3 percent before falling 1.3 percent to 1,665 yen. Nippon Yusen K.K., the shipping line which counts Asia excluding Japan as its biggest source of revenue, was unchanged after the midday break. It closed 1.5 percent lower at 339 yen.

“A low interest rate in China is good for Japanese companies who generate a large part or growing base of revenues there and who also have Chinese production sites and operations,” said Jamie Coutts, Singapore-based technical analyst and sales manager at BGC Partners.

To contact the reporter on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net Monami Yui in Tokyo at myui1@bloomberg.net.

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