Japan's Nikkei 225 Falls on China Concern; Toyota Gains on Profit Outlook

Japan’s Nikkei 225 Stock Average fell for the first time in four days, as machine makers slid after China’s central bank increased interest rates. Toyota Motor Corp. advanced after raising its profit forecast.

Komatsu Ltd., an earthmover maker that gets about 22 percent of its sales from China, slid 1.7 percent. Mitsubishi Estate Co., Japan’s No. 2 developer, slid 1.8 percent after an office brokerage said Tokyo vacancy rates rose in January. Yokogawa Electric Corp., a maker of electronic measuring tools, tumbled 11 percent after saying it will not pay a dividend. Toyota, the world’s largest automaker, jumped 5.2 percent, leading carmakers higher.

“Concerns about China’s interest hike slows the momentum of Japanese stocks,” said Naoki Fujiwara, who helps oversee $6 billion in Tokyo at Shinkin Asset Management Co.

The Nikkei 225 Stock Average declined 0.2 percent to 10,617.83 at the close in Tokyo, after rising as much as 0.6 percent. The broader Topix was almost unchanged at 944.02 compared with yesterday’s close of 944.00. About the same number of stocks rose as fell on the Topix.

Komatsu Ltd. slid 1.7 percent to 2,498 yen, and Kubota Corp., Asia’s largest tractor maker, sank 1.8 percent to 882 yen. Toshiba Machine Co., a machine-tool maker which gets about 35 percent of its revenue from Asia, dropped 4.5 percent. TDK Corp., an electronics maker that counts China as its largest market, fell 0.9 percent to 5,860 yen.

The People’s Bank of China yesterday raised the one-year lending rate by a quarter point to 6.06 percent and the one-year deposit rate an equivalent amount to 3 percent. China’s Shanghai Composite Index fell as much as 1.2 percent.

Real Estate

“China’s interest rate increase gave investors a rationale to take profits,” said Koji Toda, Tokyo-based chief fund manager at Resona Bank Ltd.

Real estate stocks had the biggest decline among the Topix index’s 33 industry groups after Miki Shoji Co., a privately held office brokerage company, said Tokyo’s office vacancy rate rose to 9.04 percent in January from 8.91 percent a month earlier.

Mitsubishi Estate lost 1.8 percent to 1,609 yen. Mitsui Fudosan Co. declined 2.5 percent to 1,663 yen. Sumitomo Realty & Development Co., Japan’s third-largest developer by market value, sank 2.8 percent to 2,013 yen. The company yesterday said net income fell 6 percent to 44.4 billion yen for the nine months ended Dec. 31.

Yokogawa Electric tumbled 11 percent to 662 yen, the steepest drop in the Nikkei 225, after saying it will not pay a dividend for this fiscal year. The company paid a dividend of 2 yen per share a year earlier.

Rating Changes

Dowa Holdings Co., a metal-products smelter, declined 5.9 percent to 586 yen after UBS AG reduced the investment rating for Dowa to “neutral” from “buy,” and JPMorgan Chase & Co. cut the rating to “underweight” from “neutral.” Obayashi Corp., a general contractor, retreated 3.1 percent to 377 yen after UBS cut its rating to “neutral” from “buy.”

Daikin Industries Ltd., Japan’s largest air-conditioner maker, fell 3.1 percent to 2,837 yen, after saying nine-month net income fell 38 percent to 11.8 billion yen ($143 million).

Among stocks that rose, Toyota jumped 5.2 percent to 3,670 yen, the biggest gain in the Nikkei 225. The automaker raised its full-year profit forecast as sales in emerging markets exceeded the company’s estimates. Net income may total 490 billion yen for the 12 months ending March 31, compared with an earlier estimate of 350 billion yen, the company said.

Toyota Recalls

Separately, a U.S. government report found no link between electronics in Toyota’s vehicles and sudden acceleration incidents. Toyota paid U.S. fines totaling $48.8 million over the way it conducted some recalls, the largest such penalty for an automaker. The company also faces about 400 lawsuits alleging lost vehicle value, injury or death from sudden acceleration.

Nissan Motor Co., which receives more than 75 percent of its revenue abroad, and produces Leaf electric cars, advanced 2.5 percent to 893 yen. A measure of automakers was the biggest positive contributor to the Topix.

President Barack Obama’s administration will propose that consumers receive a $7,500 tax credit for electric cars at the dealership, reducing the sticker price, instead of receiving the benefits when filing their tax returns, said Energy Department spokesman David Sandalow. The administration will also propose grants for as many as 30 communities to build infrastructure to recharge electric vehicles, according to Sandalow.

U.S. Retail

Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The index climbed 0.4 percent yesterday in New York after the International Council of Shopping Centers said weekly retail sales increased 2.2 percent in the week ended Feb. 5 following four straight declines, and as McDonald’s Corp. rallied after reporting higher-than-estimated monthly results.

“Although there are factors of uncertainty, the U.S. economy is steadily improving and the environment is getting supportive for stocks,” said Hiroichi Nishi, an equities manager in Tokyo at Nikko Cordial Securities Inc.

The Topix rose 5 percent this year to yesterday, as economic reports and improved corporate earnings boosted confidence in the strength of global growth. Companies in the Japanese benchmark traded at 16.1 times estimated earnings on average, compared with about 39 times at the start of 2010.

Today, 91 of the 1,668 companies in the Topix index are scheduled to release earnings statements. Of the 1,197 that have reported results since Jan. 1 for the latest quarter, 161 have exceeded analysts’ estimates, while 117 have missed them as of 3:32 p.m. in Tokyo, according to data compiled by Bloomberg.

To contact the reporter on this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net.

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

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