Japanese Stocks Decline Amid Earthquake Reconstruction, Greek Debt Woes

Japan’s stocks fell to a three month low amid concern the government will scale back spending on disaster reconstruction and Greece’s debt crisis will worsen.

Canon Inc. (7751), a camera maker that counts Europe as its biggest source of revenue, slid 1.3 percent. Toyota Motor Corp. (7203), the world’s biggest carmaker, lost 0.6 percent. Shimizu Corp. (1803), Japan’s largest builder by market value, tumbled 6.7 percent. Tokyo Electric Power Co., owner of the nuclear plant crippled by March’s earthquake and tsunami, slumped 5.6 percent after the head of Japan’s banking lobby group said lenders won’t consider forgiving loans to the company.

The Nikkei 225 Stock Average dropped 0.6 percent to 9,351.40 at the 3:00 p.m. close in Tokyo, its lowest close since March 18. Concern that Greece will default on its debt overshadowed U.S. reports yesterday on employment and housing that suggest the world’s biggest economy isn’t faltering.

“As long as the Greece’s debt crisis isn’t taken care of investors are going to be very cautious,” Naoki Fujiwara, who helps oversee $6 billion in Tokyo at Shinkin Asset Management Co. “People are worried Greece’s problems will spread to neighboring countries. If that happens, it will weigh heavily on stocks.”

‘Almost Certain’

The Nikkei declined 1.7 percent this week, the biggest weekly drop since May 13, amid concern Greece’s sovereign debt crisis will derail the global economic recovery.

Former Federal Reserve Chairman Alan Greenspan said yesterday that a default by Greece is “almost certain” and that could help drive the U.S. economy into recession.

“The problem you have is that it’s extremely unlikely the political system will work” in a way that solves Greece’s crisis, Greenspan said in an interview with Charlie Rose in New York. “The chances of Greece not defaulting are very small.”

Canon, the world’s biggest camera maker, slid 1.3 percent to 3,690 yen. Toyota, which gets about 72 percent of revenue outside of Japan, fell 0.6 percent to 3,175 yen. Daikin Industries Ltd. (6367), the world’s second-largest maker of air conditioners by sales, declined 0.9 percent to 2,760 yen.

The broader Topix index dropped 0.9 percent to 805.34, its lowest close since March 15 and extending losses this week to 1.5 percent. The gauge has tumbled 13 percent since March 10, the day before a magnitude-9 earthquake and tsunami devastated Japan’s northeast coast, triggering the worst nuclear accident in 25 years, disrupting supply chains, and leaving more than 23,000 people dead or missing.

Japan Reconstruction

“The government’s reconstruction policy isn’t moving ahead,” said Naoteru Teraoka, general manager at Tokyo-based Chuo Mitsui Asset Management Co., which oversees about $28 billion. “Even before the quake, the domestic economy was weak and you had a lot of firms dependant on overseas markets. Now, with government in such confusion, investing in the domestic market makes even less sense.”

Prime Minister Naoto Kan’s ruling Democratic Party of Japan on June 15 proposed scaling back a second disaster reconstruction package to 2 trillion yen ($25 billion), or half of the size of the first one. Kan two weeks ago survived a no- confidence vote by pledging to resign once the crisis from the March earthquake and the meltdowns at Tokyo Electric Power Co.’s Fukushima nuclear plant are contained.

Shimizu declined 6.7 percent to 318 yen, leading construction companies lower. Kajima Corp. (1812), Japan’s second- biggest contractor by sales, sank 3.9 percent to 222 yen. Smaller Obayashi Corp. (1802) slipped 3.7 percent to 336 yen.

Tepco Slides

Tokyo Electric tumbled 5.6 percent to 302 yen. Masayuki Oku, chairman of the Japanese Bankers Association, said yesterday that while banks may still provide loans to the utility, they aren’t considering forgiving the utility’s debts.

Tepco, as the company is known, has lost 86 percent of its value since March 10, the day before its Fukushima Dai-Ichi plant was destroyed. The company is the worst-performing stock on the Nikkei, which has lost 9.9 percent since the temblor.

Sekisui House Ltd. (1928) slumped 5.7 percent to 717 yen. The company had its rating lowered to “neutral” from “outperform” at JPMorgan and Credit Suisse. Separately, the builder announced plans to sell at least 50 billion yen of convertible bonds.

To contact the reporters on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; 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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