Nikkei 225 Falls Most in a Month; Carmakers Drop as Yen Threatens Profit

Japanese stocks fell, with the Nikkei 225 Stock Average dropping the most in a month. Carmakers slid on speculation the yen will remain strong against the dollar as the U.S. Federal Reserve eases monetary policy.

Toyota Motor Corp., the world’s largest carmaker, lost 1.5 percent. Honda Motor Co., Japan’s second-largest carmaker, sank 2 percent. Fast Retailing Co. tumbled 10 percent after forecasting a profit drop. Oki Electric Industry Co., a maker of communications equipment, plunged 16 percent after forecasting a loss and saying it will sell 30 billion yen ($365 million) in preferred shares.

The Nikkei 225 lost 2.1 percent to 9,388.64 at the 3 p.m. market close in Tokyo, the biggest decline since Sept. 8. The Topix index fell 1.8 percent to 824.60, with about 20 stocks retreating for each that rose. Japan’s markets were shut yesterday for a national holiday.

“The consensus is that the U.S. will further ease monetary policy and the dollar will remain weak,” said Masaru Hamasaki, who helps oversee about $17 billion as chief strategist at Toyota Asset Management Co. in Tokyo. “Concerns about Japanese corporate earnings are getting stronger because of the currency’s appreciation.”

The Topix has declined 9.1 percent in 2010, compared with gains of 4.5 percent by the S&P 500 and 3.7 percent by the Stoxx Europe 600 Index. Stocks in the Japanese benchmark are valued at 14.7 times estimated earnings, compared with 13.9 times for the S&P and 12.1 times for the Stoxx.

Monetary Easing

Futures on the Standard & Poor’s 500 Index slipped 0.7 percent. In New York, the index climbed less than 0.1 percent to 1,165.3 yesterday as trading volume sank to the lowest level of the year amid growing speculation the Federal Reserve will pump more cash into the economy to protect the recovery after payrolls declined more than expected.

The Labor Department said on Oct. 8 that U.S. payrolls fell by 95,000 workers after a revised 57,000 decrease in August. Companies added 64,000 jobs, less than forecast, while the unemployment rate held at 9.6 percent.

“Providing liquidity itself is good for the market, but that leads to a decline in the currency, so the dollar will continue to weaken,” said Kenichi Hirano, general manager and strategist at Tachibana Securities Co.

Automakers were the heaviest drag on the Topix. Toyota fell 1.5 percent to 2,851 yen. Honda sank 2 percent to 2,930 yen. Nissan Motor Co., Japan’s third-largest carmaker, dropped 1.8 percent to 727 yen.

Yen Advances

The dollar dropped to 81.39 yen yesterday, the lowest level since April 1995. The U.S. currency fell to as low as 81.81 yen today, compared with 82.37 at the close of stock trading in Tokyo on Oct. 8.

Fast Retailing, which operates the Uniqlo casual clothing chain, slumped 10 percent to 11,180 yen and was the heaviest drag on the Nikkei. The company forecast full-year profit will fall 17 percent to 51 billion yen because same-store sales declined in the first half.

Brokerages including Goldman Sachs Group Inc., Citigroup Global Markets Japan Inc. and Nomura Holdings Inc. cut their share price estimates on Fast Retailing.

Oki Electric, which makes personal computers and automated teller machines, plunged 16 percent to 62 yen, the sharpest slide since at least September 1974. It plans to sell 30 billion yen in preferred shares, according to a filing with Japan’s finance ministry.

Oki, Tepco Tumbles

Oki reversed its full-year forecast to a net loss of 28 billion yen from a 4.5 billion yen profit, citing costs to issue preferred shares and a one-time charge related to an early retirement program.

Tokyo Electric Power Co., Asia’s biggest utility, sank 4.5 percent to 1,900 yen, a level not seen since May 1985, as investors anticipated the price of a new share offering. The company, also known as Tepco, said on Sept. 29 that it plans to raise up to 555 billion yen through a share sale and will set the offering price sometime between Oct. 12 and Oct. 14.

The Osaka Securities Exchange’s Jasdaq market and Hercules market integrated today. Transaction Co., a maker of household and health-care goods, traded at 1,013 yen on its debut on the bourse, down 28 percent from the initial public offering price of 1,400 yen.

-- With assistance from Norie Kuboyama in Tokyo. Editor: Sam Waite, Nick Gentle.

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

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.

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