Japan Stocks Slide for Third Day on Goldman Rating Cut, Greek Debt Crisis

Japanese stocks fell for a third day as Goldman Sachs Group Inc. lowered its rating on the country’s equities and on concern Greece may have to restructure its debt, hampering the global economic recovery.

Toyota Motor Corp. (7203), the world’s No. 1 carmaker, slid 1.8 percent. Mitsubishi UFJ Financial Group Inc. (8306) lost 1.6 percent, leading the nation’s lenders down after Standard & Poor’s Ratings Services cut credit ratings for Tokyo Electric Power Co., the owner of a damaged power plant. Ricoh Co., an office equipment maker that gets almost a quarter of its sales from Europe, declined 1.1 percent after the euro weakened. Credit Saison Co., a consumer lender, sank 6 percent after saying profit fell short of its outlook due to a quake-related charge.

“Investors are avoiding putting money on risk assets, strengthening the yen and weighing on the stock market,” said Naoki Fujiwara, who helps oversee $6 billion in Tokyo at Shinkin Asset Management Co. “Uncertainty about compensation from the nuclear disaster and concern about the Japanese government’s credibility may be weighing down the market.”

The Nikkei 225 Stock Average fell 0.9 percent to 9,558.30 at the close in Tokyo. The broader Topix lost 1.2 percent to 829.55, with four times as many shares declining as advancing.

The Topix has tumbled 11 percent since March 10, the day before a magnitude-9 earthquake and tsunami devastated Japan’s northeast coast, disabled a nuclear power plant and disrupted supply chains at companies.

Tepco Tumbles

Tokyo Electric, the operator of the nuclear power plant crippled by the temblor, tumbled 7.3 percent to 420 yen, the biggest drop in the Nikkei 225. (NKY) S&P said on May 13 it lowered to BBB from BBB+ its long-term corporate credit and debt ratings on the utility. Also, Tepco said on May 15 that fuel in the Fukushima Dai-Ichi No. 1 reactor melted at an early stage after the March 11 tsunami that caused widespread damage to Japan’s northeastern coast.

Contracts protecting debt of Tokyo Electric, or Tepco, from default jumped 145.4 basis points to 357.8 basis points on May 13, the biggest increase since March 15 and the highest level since April 19, according to data provider CMA, which compiles prices quoted in the privately-negotiated market.

Moody’s Japan K.K. said in a report “forgiving Tepco’s prior bank loans would be credit negative for lenders.” Comments stated by Chief Cabinet Secretary Yukio Edano last week made financial institutions and the market unstable, Moody’s said.

Banks Drop

“People won’t support” using public funds for Tepco unless banks waive some loans made before the March 11 earthquake and tsunami crippled its Fukushima Dai-Ichi nuclear plant, Edano said on May 13 in Tokyo.

Mitsubishi UFJ fell 1.6 percent to 377 yen. Sumitomo Mitsui Financial Group Inc. (8316), Japan’s second-largest bank by market value, retreated 2.1 percent 2,401 yen. Sumitomo Mitsui posted a loss in the fourth quarter after the record earthquake and said profit will drop 16 percent this year on higher costs for bad loans.

The Standard & Poor’s 500 Index lost 0.8 percent to 1,337.77 on May 13 in New York as CA Inc., the second-largest maker of software for mainframe computers, led technology shares lower after earnings missed estimates and banks slid amid concern about Europe’s debt crisis.

Automakers were the biggest contributor to the Topix’s drop among its 33 industry groups, followed by banks. Toyota slumped 1.8 percent to 3,340 yen and smaller rival Nissan Motor Co., a carmaker that gets more than three quarters of its sales overseas, fell 2.4 percent to 803 yen.

Weaker Euro

The euro fell against all but two of its 16 most-traded counterparts on concern Greece may have to restructure its debt and the nation’s problems may spread in the region. The shared currency slipped to as much as 113.42 yen today in Tokyo, compared with 114.79 yen at the close of stock trading on May 13, cutting the value of European income at Japanese companies when converted into their home currency.

Ricoh fell 1.1 percent to 849 yen and Kyocera Corp. (6971), an electronic components maker that gets 20 percent of its revenue from Europe, declined 1.3 percent to 8,510 yen.

German Finance Minister Wolfgang Schaeuble said extending the maturities of Greek bonds may be a way to help ease the country’s debt crisis if private investors participate. While it’s too early to say whether more help is needed, “extra measures” may be needed if Greece can’t return to financial markets next year as planned under the European-led aid program agreed in 2010, Schaeuble said in an interview with ARD television in Berlin yesterday.

Brussels Talks

As euro-area finance ministers prepare to discuss the resurgence of the Greek debt crisis in Brussels on May 16, Schaeuble pressed the government to do its part and stay the course on its pledge of finding 50 billion euros ($70.6 billion) in privatization revenue.

Japan’s equities were downgraded to “underweight” at Goldman Sachs, which cited “greater cautiousness” on U.S. growth and domestic risks such as electricity supply and yen strength.

Of the 1,500 companies in the Topix index that have reported earnings results since April 1, 232 have exceeded analysts’ estimates, while 266 have missed them, according to data compiled by Bloomberg.

Financial services companies had the second-biggest decline in the Topix, following utilities.

Credit Saison tumbled 6 percent to 1,235 yen. The company said on May 13 that full-year net income fell 31 percent to 12.8 billion yen ($158 million), short of its forecast by 22 percent, as it took a quake-related charge.

Promise Co., Japan’s No. 2 consumer lender by market value, plunged 11 percent to 639 yen after swinging to a net loss of 96 billion yen from a year-earlier profit, with falling revenue and more reserves needed to repay overcharged interest.

To contact the reporter 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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