Japanese Stocks Drop on Yen’s Gain, Lower Economic Forecasts

Japanese stocks fell to the lowest in five months as the yen approached a post-World War II high, hurting prospects for exporters’ earnings, and after Morgan Stanley MUFG Securities Co. cut Japan’s economic forecast.

Toyota Motor Corp. (7203), the world’s largest carmaker, declined to the lowest since January 2009. Kyocera Corp. (6971), a maker of solar panels that gets 17 percent of its sales in the U.S., lost 2.3 percent. Minebea Co., a ball-bearing maker, tumbled 5.7 percent after Goldman Sachs Group Inc. cut its profit and share price estimates of Japanese electronic components makers.

The Nikkei 225 Stock Average fell 1.3 percent to 8,943.76 at the 3 p.m. close in Tokyo. The broader Topix index declined 1.2 percent to 767.31 with five stocks retreating for every two that rose. Both gauges dropped to the lowest since March 15.

“The yen’s appreciation is weighing on Japanese stocks,” said Naoteru Teraoka, general manager at Tokyo-based Chuo Mitsui Asset Management Co., which oversees about $28 billion. “The yen and the clouded overseas economic outlook are making people worried. Even though a panicking situation in the market has eased, nothing has been resolved yet.”

The Topix has lost 8.8 percent this month amid concern Europe’s debt crisis will damage the banking system and damp demand in one of Japan’s biggest export markets. Japanese stocks also fell after Standard & Poor’s on Aug. 5 cut its rating on U.S. government debt.

Topix Valuation

Declines in Japanese shares this month reduced the average price of stocks in the Topix to 0.9 times book value, the lowest level since March 2009. A level below 1 means a company’s assets are worth more than its market capitalization.

Morgan Stanley MUFG Securities cut Japan’s 2012 economic growth forecast to 1.3 percent from 2.9 percent following “weakening prospects for the global economy,” according to a report dated today.

Other report from Morgan Stanley showed the bank cut its forecast for global growth this year, citing an “insufficient” response to Europe’s sovereign debt crisis, weakened confidence and the prospect of fiscal tightening. The bank estimates expansion of 3.9 percent, down from a previous forecast of 4.2 percent, according to an e-mailed report dated today. A prediction of 3.8 percent for next year is down from 4.5 percent previously.

Futures on the Standard & Poor’s 500 Index slipped 1 percent today. In New York, the S&P 500 added 0.1 percent to 1,193.89 yesterday. About 18 stocks fell for every 17 that rose on U.S. exchanges as Dell Inc. forecast weaker sales and two Federal Reserve officials expressed concern about the amount of stimulus being applied to the economy.

Fed Criticism

Federal Reserve Chairman Ben S. Bernanke’s pledge last week to keep interest rates near zero until mid-2013 was “inappropriate policy at an inappropriate time,” Charles Plosser, president of the Fed Bank of Philadelphia, said yesterday in a radio interview on “Bloomberg Surveillance” with Tom Keene and Ken Prewitt. Dallas President Richard Fisher said the central bank shouldn’t enact policy to protect stock investors. Both officials dissented from the Fed’s Aug. 9 statement.

“People are trying to identify what measures will be taken while sentiment is worsening globally, so the market will lack direction,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co.

Falling Exports

In Japan, exports fell more than expected in July amid the global slowdown and strengthening currency. Overseas sales decreased 3.3 percent in July from a year earlier, the Finance Ministry said today in Tokyo. The median estimate of 24 economists surveyed by Bloomberg News was for a 2.6 percent decline, after a 1.6 percent decrease in June.

Toyota lost 1.7 percent to 2,807, the lowest since January 2009. Honda Motor Co., Japan’s third-largest carmaker, slumped 2.6 percent to 2,486 yen, a level not seen since July 2009. Kyocera slid 2.3 percent to 7,130 yen.

The yen appreciated to 76.45 yen today and touched 76.41 after the stock market closed yesterday in Tokyo, approaching its post-World War II high of 76.25 yen reached on March 17. A stronger yen hurts Japanese exporters because it cuts the value of overseas sales.

Minebea, TDK

Electronic components makers declined after Goldman Sachs Group cut its estimates of profits and share prices of companies including Minebea, TDK Corp. (6762) and Shinko Electric Industries Co. because of the yen’s appreciation and weakening demand. Goldman Sachs analyst Daiki Takayama said the companies have a high risk of cutting profit forecasts.

Minebea tumbled 5.7 percent to 313 yen, a level not seen since February 2009. Takayama said operating profit will decline to 16.5 billion yen ($215 million) this year, down 8.3 percent from his earlier estimate. The bank cut its 12-month share price target by 5.1 percent to 370 yen.

TDK slumped 4.1 percent to 3,320 yen. Shinko Electric lost 3.5 percent to 526 yen, its lowest since December 2008.

Among stocks that rose, Fast Retailing Co., Asia’s biggest clothing chain, jumped 3.3 percent to 14,850 yen, the highest since April 2010. The company had its rating increased to “buy” from “neutral” at Goldman Sachs, which said that the company will benefit from increasing spending on clothes in China and increase market share in South Korea, Hong Kong and Taiwan. The company’s operating profit will double to 247 billion yen by 2020, according to a report dated yesterday.

To contact the reporters on this story: 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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