Most Japanese Stocks Fall as Banks Drop on Fed Speculation; Exporters Gain

Most Japanese stocks fell, led by banks and brokerages, as the Wall Street Journal said the scale of U.S. Federal Reserve asset purchases may be less than anticipated. Exporters gained as the yen weakened.

Mitsubishi UFJ Financial Group Inc., Japan’s largest bank by market value, retreated 1.8 percent. Nomura Holdings Inc., Japan’s No. 1 brokerage, lost 1.1 percent. JX Holdings Inc., Japan’s largest oil refiner, dropped 1.7 percent after crude oil prices fell. Toyota Motor Corp., the world’s biggest carmaker, advanced 1.5 percent. Honda Motor Co., a carmaker that gets more than 80 percent of its revenue outside Japan, gained 1.9 percent.

“Shares declined on speculation the size of the U.S. monetary-easing measures will be smaller than expected,” said Hideaki Higashi, strategist at SMBC Friend Securities Co. “Concerns increased that the amount of money in the markets will be smaller and that may slow the speed of gains in the stock market.”

The Topix index fell 0.18 point, or less than 0.1 percent, to 817.76 at the 3 p.m. market close in Tokyo, with about eight stocks falling for every seven that gained. The gauge rose as much as 0.6 percent and fell as much as 0.6 percent. The Nikkei 225 Stock Average increased 0.1 percent to 9,387.03 after sliding as much as 0.5 percent.

“As hopes for Japanese stocks are shrinking, shares tend to react to negative factors more easily than they react to positive news,” said Masaru Hamasaki, who helps oversee about $17 billion as chief strategist at Toyota Asset Management Co. in Tokyo.

Easing Measures

The Topix has declined 9.9 percent in 2010, compared with gains of 6.3 percent by the Standard & Poor’s 500 Index and 5.1 percent by the Stoxx Europe 600 Index. Stocks in the Japanese benchmark are valued at an average of 14.6 times estimated earnings, compared with 14.1 times for the S&P 500 and 12.3 times for the Stoxx 600.

The Federal Reserve is likely to offer a program of U.S. Treasury-bond purchases worth a few hundred billion dollars over several months at its next meeting, the Wall Street Journal reported, without saying where it obtained the information.

Estimates for the ultimate size of the asset-purchase program ranged from $1 trillion at Bank of America-Merrill Lynch Global Research to $2 trillion at Goldman Sachs Group Inc., with economists at both firms agreeing the Fed will likely start by announcing $500 billion after the Nov. 2-3 meeting.

Banks, Brokerages Drop

Mitsubishi UFJ lost 1.8 percent to 373 yen and Sumitomo Mitsui Financial Group Inc., Japan’s second-largest bank by market value, sank 0.9 percent to 2,380 yen.

Financial stocks also declined ahead of AIA Group Ltd.’s listing in the Hong Kong market. New York-based American International Group Inc.’s main Asian unit is scheduled to start official trading on the Hong Kong Stock Exchange on Oct. 29.

“Some people are probably selling financial companies’ shares in order to keep enough funds to buy AIA stock,” SMBC’s Higashi said.

Nomura dropped 1.1 percent to 432 yen and Daiwa Securities Group Inc., the second-biggest brokerage, slumped 2.6 percent to 332 yen. Trading volume on the Tokyo Stock Exchange’s first section totaled 1.74 billion shares today, compared with a daily average of 1.95 billion.

“As market volume remains low, we cannot expect an increase in securities-transactions fees at brokerages,” Toyota Asset’s Hamasaki said.

Exporters Lead Gains

JX Holdings fell 1.7 percent to 476 yen and Inpex Corp., Japan’s biggest oil-explorer, slid 0.3 percent to 436,500 yen as crude oil futures for December delivery dropped as much as 30 cents to $82.25 in electronic trading in New York today.

Makers of cars and electronic products which rely on overseas sales were the biggest support for the Topix throughout the day. Toyota Motor advanced 1.5 percent to 2,910 yen and Honda climbed 1.9 percent to 2,960 yen. Fanuc Ltd., Japan’s No. 1 maker of industrial robots which derives almost 80 percent of its revenue outside the nation, gained 1 percent to 11,230 yen.

The yen depreciated to as low as 81.77 against the dollar today, the weakest level since Oct. 21, compared with 80.68 at yesterday’s close of stock trading. A weaker yen boosts the value of overseas income at Japanese companies when converted into their home currency.

Yen, Exporters

The yen appreciated to 80.41 against the dollar on Oct. 25, the highest level since April 1995. It is headed 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 closing price.

“Exporters are leading gains as the yen paused in its strengthening,” said Naoteru Teraoka, general manager at the investment unit of Tokyo-based Chuo Mitsui Asset?Management Co., which oversees about $26 billion. “Earnings for the past period were strong, but people want to know how much companies are prepared for the impact of the yen’s appreciation on their earnings.”

Fuji Heavy Industries Ltd., the maker of Subaru cars, surged 5.3 percent to 555 yen, the second-largest increase in the Nikkei 225. The company had 44 billion yen ($540 million) in first-half net income, beating its 23 billion yen profit outlook on higher sales and lower costs, according to a preliminary earnings statement. Goldman Sachs Group Inc. and JPMorgan Chase & Co. raised their 12-month share-price estimates.

Earnings Peak

“The scale of the first-half profit revision appears to be a positive surprise versus expectations,” Kurt Sanger, an analyst at Deutsche Bank AG, wrote in a report dated yesterday. Sanger said the company’s first-half profit exceeded his estimate and that Fuji Heavy will likely revise its full-year forecast.

Oct. 29 is the peak day for earnings reports in Japan, with 272 of the 1,662 companies in the Topix scheduled to report results, according to data compiled by Bloomberg.

“Investors still want to see the results of corporate earnings, which will increase toward the end of this week, so buying momentum will be limited,” said Hiroichi Nishi, an equities manager in Tokyo at Nikko Cordial Securities Inc.

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

To contact the editor responsible for this story: Darren Boey at dboey@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.