Nikkei 225 Swings Between Gains and Losses as China Raises Reserve Quotas

Japan’s Nikkei 225 (NKY) Stock Average declined for a second day after China raised reserve requirements for banks, fueling concern more tightening measures will curb demand in Japan’s biggest overseas market.

TDK Corp. (6762), a manufacturer of electronic parts which gets almost a third of its revenue from China, lost 3.7 percent. Komatsu Ltd. (6301) a maker of construction equipment that has benefited from China’s building boom, fell 1.2 percent. Canon Inc. (7751) sank 1.4 percent after the yen gained, clouding the earnings outlook for the camera maker, which gets about 80 percent of its sales overseas.

“There’s too much uncertainty for investors to be confident enough to take positions,” said Koichi Kurose, chief strategist in Tokyo at Resona Bank Ltd., which oversees about $57 billion in assets. In China, “the tightening measures are dragging on, and this isn’t good for stocks or the economy.”

The Nikkei fell 0.4 percent to 9,556.65 at the close of trading in Tokyo, after earlier gaining as much as 0.2 percent. The broader Topix dropped 0.6 percent to 836.34. The index has declined 8.7 percent since a magnitude-9 earthquake and tsunami on March 11 devastated Japan’s northeast coast and crippled Tokyo Electric Power Co.’s Dai-Ichi nuclear power plant.

China Tightens

TDK sank 3.7 percent to 4,305 yen. Komatsu, the world’s second-biggest maker of construction equipment, fell 1.2 percent to 2,752 yen following measures by China’s central bank on April 15 to cool investment and tame inflation.

China increased banks’ reserve requirements to lock up cash and cool price gains after the world’s second-largest economy showed signs of overheating. Inflation accelerated to 5.4 percent in March, the most since July 2008, the statistics bureau said April 15.

Exporters dropped after the yen strengthened, dimming the earnings outlook for companies when they repatriate overseas sales. Canon lost 1.4 percent to 3,620 yen. Sony Corp. (6758), Japan’s No. 1 exporter of electronics, fell 1.4 percent to 2,427 yen.

The yen rose to as high as 118.94 against the euro today in Tokyo, compared with 120.42 at the close of trading on April 15, on speculation Greece may default on its debt. Against the dollar, Japan’s currency also appreciated to 82.86 from 83.23.

Makers of food and drinks gained after Tokyo Electric Power Co. set out a plan to end the nuclear crisis at its damaged power plant within the next six to nine months. Radiation leaks have contaminated some food and water supplies and caused the evacuation of more than a hundred thousand people living within 20 kilometers (12 miles) of the plant.

Kikkoman Corp. (2801), Japan’s biggest maker of soy sauce, rallied 2.5 percent to 786 yen. Asahi Breweries Ltd. (2502), a maker of beer and other drinks, advanced 1.7 percent to 1,420 yen.

“People are getting less nervous about the level of radiation contamination,” Yuuki Sakurai, president at Fukoku Capital Management Inc., which manages the equivalent of $8.6 billion in Tokyo.

To contact the reporters on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net.

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

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