Japanese Stocks Fall, Led by Utilities, Before Tepco Earnings

Japanese stocks fell for a second day, led by utility companies as uncertainty about the outlook for Japan’s energy industry increased ahead of Tokyo Electric Power Co. announcing its full-year profit plunged.

Kansai Electric Power Co. slumped 4.9 percent, leading declines on the Nikkei 225 Stock Average. Inpex Corp. (1605), Japan’s largest energy exploration company, retreated 4 percent after oil prices dropped yesterday. Taiheiyo Cement Corp. (5233), a cement maker, declined 1.9 percent after Credit Suisse Group AG cut its rating on the company.

The Nikkei 225 fell 0.1 percent to 9,607.08 at the 3 p.m. close of trading in Tokyo. The broader Topix index dropped 0.5 percent to 827.77 with about three stocks retreating for every two that rose. For the week, the Nikkei has decreased 0.4 percent, while the Topix is down 1.5 percent.

“There are too many unclear negative factors,” including the government’s scheme for compensation for the nuclear issues and overhaul of the nation’s energy industry, said Tsutomu Yamada, a market analyst at Kabu.com Securities Co. in Tokyo. “People are selling utility shares on speculation and rumors.”

The Topix has lost 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. Shares in the gauge traded at 0.94 times estimated book value.

The utility known as Tepco reported after the close that it had a full-year net loss of 1.25 trillion yen ($15 billion), the biggest loss by a Japanese company in eight years, following the Fukushima nuclear accident. President Masataka Shimizu will resign, the company said in a statement today.

Previous Massive Losses

Tepco’s loss eclipsed the 812 billion yen deficit reported by Nippon Telegraph & Telephone Corp. (9432) in the year ended March 2002, according to data compiled by Bloomberg. Mizuho Financial Group Inc. (8411)’s 2.38 trillion yen loss the following year holds the record.

Utilities were the heaviest drag on the Topix index among the 33 industry groups ahead of Tepco’s earnings announcement after the Yomiuri newspaper reported the company may report a record 1.5 trillion yen loss. Kansai Electric sank 4.9 percent to 1,331 yen, and Chubu Electric Power Co. lost 4.7 percent to 1,222 yen, the lowest levels since 1985. Tepco gained 2.5 percent to 367 yen after plunging as much as 8.9 percent.

Prime Minister Naoto Kan said on May 18 that Japan will debate an overhaul of the nation’s energy industry, where companies currently hold regional monopolies and are in charge of both power generation and distribution networks.

BOJ Decision

The Bank of Japan’s policy board unanimously voted to maintain monetary policy even after a report yesterday showed the country slipped into a recession following a record earthquake. The Governor Masaaki Shirakawa and his eight colleagues decided to maintain a 30-trillion yen credit program and a 10-trillion yen asset-purchase fund that represent the bank’s main policy tools. Deputy Governor Kiyohiko Nishimura dropped his call made last month to expand asset purchases to provide more stimulus. The key overnight rate was kept at zero to 0.1 percent.

“It was disappointing there was nothing new from the BOJ,” said Masayoshi Yano, a senior market analyst at Tokyo- based Meiwa Securities Co. “I thought the BOJ would make some decisions after the worse-than-expected GDP figures.”

Inpex lost 4 percent to 532,000 yen. Japan Petroleum Exploration Co. (1662), the second-biggest oil driller, sank 2.4 percent to 3,625 yen. Mitsubishi Corp. (8058), Japan’s largest commodities trader, dropped 1.3 percent to 2,032 yen.

Crude oil for June delivery tumbled 1.7 percent to $98.44 a barrel in New York yesterday. The London Metal Exchange Index of prices for six industrial metals including copper and aluminum declined 1.7 percent yesterday.

Cement makers retreated following downgrades by Credit Suisse Group. Taiheiyo Cement fell 1.9 percent to 152 yen. Sumitomo Osaka Cement Co. declined 2.3 percent to 216 yen.

-- Editors: John McCluskey.

To contact the reporters on this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net.

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

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