Japanese Stocks Fall Third Week as Domestic Growth Concern Saps Confidence

Japanese stocks declined, extending losses on the Nikkei 225 Stock Average for a third week, after the government cut its forecast for the country’s economic growth and as concern grew Europe’s debt crisis will spread.

Toyota Motor Corp. (7203), the world’s biggest carmaker, fell 1.1 percent after IHS Automotive reduced its forecast for U.S. auto sales. Hitachi Construction Machinery Co., which gets 26 percent of sales from China, dropped 2.1 percent after a report mainland regulators have introduced new curbs on real estate loans. Canon Inc., the world’s biggest camera maker, climbed 5.6 percent after announcing a share buyback.

The Nikkei 225 lost 0.2 percent to 8,963.72 at the 3:00 p.m. close in Tokyo. The gauge dropped 3.6 percent this week as sentiment weakened amid signs Europe’s debt crisis may be spreading and after Standard & Poor’s cut the U.S. credit rating. The broader Topix index slid 0.4 percent today to 768.19.

“Investors are losing confidence,” Naoki Fujiwara, who helps oversee $6 billion at Shinkin Asset Management Co. in Tokyo. “The recovery is looking weak and investors are concerned about the earnings outlook.”

Japanese stocks reversed early gains after the government cut its forecast for economic growth this year to 0.5 percent from 1.5 percent as a record earthquake disrupted output and depressed consumer spending.

U.S. Car Sales

The nation’s top car manufacturers declined after IHS Automotive reduced its forecast for U.S. auto sales this year by 200,000 units to 12.5 million light vehicles. Analyst Rebecca Lindland also cut her forecast for 2012 deliveries to 13.5 million vehicles from 14.7 million.

Toyota slid 1.1 percent to 2,819 yen. Honda Motor Co., which counts North America as its biggest market, fell 1.3 percent to 2,537 yen. Nissan Motor Co., which gets 33 percent of sales from the U.S. and Canada, declined 2.3 percent to 693 yen.

Futures on the Standard & Poor’s 500 Index dropped 1.2 percent today. The gauge surged 4.6 percent in New York yesterday, reversing the previous day’s decline, after claims for U.S. unemployment benefits unexpectedly dropped last week to a four-month low. Stocks in the U.S. also rose after better- than-estimated earnings from companies including Cisco Systems Inc., the world’s largest maker of networking equipment, and Rupert Murdoch’s News Corp.

Fundamentals?

“The latest U.S. jobs data and earnings results are a reasonable indicator of the health of the economy and may suggest that things are not as dire as the markets had feared,” said Prasad Patkar, who helps manage the equivalent of $1.7 billion at Sydney-based Platypus Asset Management Ltd. “However, fundamentals are not really driving stock markets at the moment To a large extent, we may be getting a bounce because they are oversold.”

Stocks also fell after a report that the China Banking Regulatory Commission last month told banks to set significantly higher standards on loans for commercial properties. China is Japan’s biggest export market.

Hitachi Construction Machinery dropped 2.1 percent to 1,470 yen. Komatsu Ltd., a construction machinery maker that gets 23 percent of sales from China, lost 0.8 percent to 2,005 yen.

A global selloff that has erased more than $7 trillion from world markets since July 26 has cut share prices to a level where some investors are seeing bargains, said Shinkin Asset’s Fujiwara. Japan’s Topix has plunged 11 percent this month, reducing the price of companies on the index to 0.90 times estimated book value, the lowest level since March 2009. A number below one means investors can buy companies for less than the value of their assets.

‘Price Attractively’

“Japanese stocks are priced attractively,” Fujiwara said. “Investors are looking to buy on dips but the potential for earnings growth is weak so nobody’s going to chase prices higher.”

Among stocks that rose, Canon surged 5.6 percent to 3,590 yen, its biggest advance since May 26. The maker of PowerShot and Ixus compact cameras will buy back as many as 15 million shares for as much as 50 billion yen ($651 million) between today and Sept. 16, according to a statement to the Tokyo Stock Exchange yesterday after the market closed. The stock has lost 15 percent this year.

Dai-Ichi Life Insurance Co. climbed 2.2 percent to 93,000 yen after saying first-quarter net income more than tripled to 32.3 billion yen from 10.4 billion yen a year earlier.

Of the 1,466 companies that reported earnings since July 11, 203 surpassed analyst estimates, while 121 fell short, according to data compiled by Bloomberg.

The Nikkei 225 (NKY) has fallen 12 percent this year through yesterday compared with a 6.8 percent decline for the S&P 500 and a 16 percent drop for the Stoxx Europe 600 Index. Shares on the benchmark Japanese index were valued at 14.9 times estimated earnings on average, compared with 11.8 times for the S&P 500 and 9.4 for the Stoxx 600.

To contact the reporter 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: Darren Boey at dboey@bloomberg.net

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