Nikkei 225 Falls Most in a Month After IMF Cuts Forecasts, Aftershocks

Japanese stocks fell the most in almost a month after the International Monetary Fund cut the economic growth forecast for the country and strong aftershocks continued to shake Tokyo following a record quake and tsunami.

Tokyo Electric Power Co. tumbled the most on the Nikkei 225 (NKY) Stock Average after the utility said radiation leaks from reactors crippled by last month’s disaster may eventually exceed those from Chernobyl. Toyota Motor Corp. (7203) and Honda Motor Co. fell after SMBC Nikko Securities Inc. said supply disruptions may reduce profits at the carmakers by billions of dollars. Inpex Corp. (1605), the country’s No. 1 energy explorer, slumped 5.2 percent as oil prices dropped.

The Nikkei 225 fell 1.7 percent to 9,555.26 at the 3 p.m. close in Tokyo, while the Topix index slipped 1.6 percent to 838.51. Both gauges dropped the most since March 15. Stocks extended losses following an aftershock in the last hour of trading and after Japan’s nuclear regulator said the accident at the Fukushima reactors was worse than it previously stated.

“Investor sentiment is deteriorating because it seems uncertainty is going to remain for a long time,” said Ikuo Mitsui, who helps manage $270 million at Vivace Capital Management Co. “There’s concern about how disruptions to Japan’s supply chain will affect the global economy.”

Aftershocks, Reactors

The Nikkei dropped as much as 2.1 percent after a magnitude- 6.3 earthquake struck Fukushima prefecture at 2:07 p.m., shaking buildings in Tokyo more than 200 kilometers to the south. The temblor followed a magnitude-6.6 aftershock that hit yesterday, a month after the March 11 disaster that left 27,493 dead or missing and disabled Tokyo Electric’s Fukushima Dai-Ichi nuclear plant. Yesterday’s aftershock stopped cooling systems at the damaged power station for 50 minutes.

Tokyo Electric, which is battling to lower temperatures at four crippled nuclear reactors, plunged 10 percent to 450 yen. Shares rose as much as 7.8 percent after Reuter’s reported that the government isn’t considering nationalizing the utility, citing Tadahiro Matsushita, Japan’s Vice Minister of Economy, Trade and Industry.

Japan’s Nuclear and Industrial Safety Agency raised its severity rating of the Fukushima accident to the highest level of 7, which matches the 1986 Chernobyl disaster. The accident was previously rated 5 on the global scale, the same as the 1979 partial reactor meltdown at Three Mile Island in Pennsylvania.

Nikkei Valuations

Japan’s Nikkei has lost 8.4 percent since March 10, the day before the magnitude-9 earthquake and tsunami that devastated Japan’s northeast coast. Stocks in the Japanese benchmark are valued at 14.3 times estimated earnings on average, compared with 13.6 times for the S&P 500 and 11.3 times for the Stoxx Europe 600.

Toyota slid 0.6 percent to 3,240 yen, while Honda dropped 1.4 percent to 2,862 yen after SMBC Nikko Securities slashed profit estimates for Japan’s top two carmakers, citing parts shortages and reduced output.

Shotaro Noguchi, a senior analyst at the brokerage in Tokyo, said Toyota’s operating profit for the year ending March 2012 will fall to 310 billion yen ($3.68 billion) versus an earlier prediction of 900 billion yen. Honda’s profit may drop to 460 billion yen, compared with an earlier estimate of 670 billion yen, Noguchi said in a report that followed a downgrade of Japan’s auto sector by Citigroup Inc. yesterday.

Crude Slides

U.S. stocks and crude prices fell yesterday after the IMF cut its estimate for growth in the U.S., the world’s biggest economy and the largest oil consumer. In New York, the Standard & Poor’s 500 Index dropped 0.3 percent to 1,324.46. S&P 500 futures slid 0.5 percent today.

An index that includes energy-related shares slid the most among the Topix’s industry groups after crude prices fell. Inpex retreated 5.2 percent to 620,000 yen. Japan Petroleum Exploration Co. (1662), the second-biggest oil driller, dropped 3.5 percent to 4,010 yen.

Oil for May delivery tumbled from a 30-month high, dropping 2.5 percent to settle at $109.92 a barrel in New York yesterday.

The U.S. economy will expand 2.8 percent this year, slowing from 2.9 percent last year and falling short of a January forecast for 3 percent growth in 2011, the IMF said. The Washington-based institution also cut its estimate of Japan’s growth to 1.4 percent from 1.6 percent after the nation’s earthquake and tsunami.

Shimadzu, which makes measuring instruments and precision tools, dropped 4 percent to 670 yen after Mizuho Securities cut the company’s investment rating to “neutral” from “outperform,” saying last month’s earthquake will likely slow demand for measuring equipment.

To contact the reporter on 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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