Japanese Stocks Decline on Strenthening Yen, Signs of Overheating Market

March 1 (Bloomberg) -- Japanese stocks fell, with the Topix Index (TPX) dropping for a second day, as the yen trimmed yesterday’s decline, dimming the prospects for exporters, and on speculation the market was overbought.

Toyota Motor Corp. (7203), which gets 28 percent of its sales in North America, slid 0.6 percent as the yen rose. Komatsu Ltd. (6301), a maker of construction machinery that counts China as its biggest market, slid 2.8 percent on speculation a rise in mainland manufacturing will reduce the need for further monetary easing. Softbank Corp. (9984) led communications stocks higher after the government awarded the mobile carrier a spectrum license to expand its data capacity.

The Topix Index (TPX) lost 0.5 percent to 831.54 at the 3 p.m. close of trading in Tokyo after rising as much as 1.2 percent earlier today. The Nikkei 225 Stock Average fell 0.2 percent to 9,707.37. The gauge gained 10.5 percent in February, its biggest monthly advance since December 2009.

“The yen is driving down equities this afternoon,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc. “Investors have been sensitive about overheating in the market and they are selling to lock in profits after the market digested major factors.”

Technical Indicators

The 14-day relative strength index for the Nikkei 225 (NKY) was about 81 today, above the 70 level that some traders say signal an asset may be overbought. The 25-day Toraku index, which compares the number of advancing and declining shares on the Tokyo Stock Exchange, was 128.9 yesterday. A reading above 120 indicates a drop may be likely.

Futures on the Standard & Poor’s 500 Index (SPXL1) slid 0.2 percent today. The gauge dropped 0.5 percent in New York yesterday as Federal Reserve Chairman Ben S. Bernanke gave no indication of further stimulus measures.

Japanese stocks rose earlier after data showed the U.S. economy expanded more than forecast and business activity accelerated, boosting the dollar. Shares also advanced after Japanese companies unexpectedly increased domestic investment by the most in almost five years.

‘Fundamental Change’

“Investors see there’s less risk around, and they are prepared to put more money back in,” said Angus Gluskie, who oversees more than $350 million at White Funds Management in Sydney. “We might have to stop and think about an environment where the U.S. dollar is rising and where interest rates in the U.S. start to rise. That’s such a fundamental change.”

Shares reversed gains as the dollar fell 0.3 percent to 80.90 yen today after rising 0.9 percent yesterday. A weaker dollar cuts the value of overseas earnings for some Japanese companies.

Toyota fell 0.6 percent to 3,335 yen after climbing 2.2 percent. Panasonic Corp. (6752), an electronics company that generates 10 percent of its sales in the U.S., lost 0.9 percent to 752 yen after gaining 2.1 percent earlier in the day.

Komatsu slid 2.8 percent to 2,354 yen after China’s purchasing managers’ index rose to 51.0 from 50.5 in January, the third month of gains, according to the nation’s statistics bureau. Hitachi Construction Machinery Co. (6305), a machinery maker that generates 26 percent of its sales in China, lost 1.2 percent to 1,678 yen.

Softbank Rises

Among stocks that advanced, Softbank rose 2 percent to 2,469 yen. Shares of Japan’s No. 3 mobile-phone carrier rose after the Communications Ministry awarded it a new spectrum license that will help it compete in data delivery. Larger rival NTT DoComo Inc. (9437) added 0.5 percent to 139,500 yen, while KDDI Corp. (9433) gained 1.2 percent to 522,000 yen.

The Topix (TPX) has gained 18 percent from its Nov. 24 low as monetary easing in Europe, China and Japan fueled optimism the global economy will avert a slowdown. The advance pushed the value of stocks on the measure to 1.21 times book value, up from 1.03 in November. A number below one means companies can be bought for less than value of their assets.

The Nikkei 225 Volatility Index (VNKY) rose 4.2 percent to 24.37, indicating traders expect a swing of about 7 percent on the benchmark gauge over the next 30 days.

The following were among the most active shares in the Japanese market today. Stock symbols are in parentheses after company names.

Elpida Memory Inc. (6665) (6665 JT) was unchanged at 7 yen after plummeting 97 percent yesterday. The chipmaker filed for bankruptcy on Feb. 27 with debts of 448 billion yen ($5.5 billion), according to a filing with the finance ministry.

Shindengen Electric Manufacturing Co. (6844) (6844 JT), a maker of electric devices, slid 5 percent to 364 yen after cutting its net-income forecast by 67 percent to 1.1 billion yen for the year ending March 31, the company said in a filing, citing waning global demand for chips.

TDK Corp. (6762) (6762 JT) climbed 0.6 percent to 4,265 yen after the electronic parts maker said it repurchased 2.4 percent of its outstanding shares.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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

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