Japanese Stocks Drop for Third Day on Growing Concern Over Greek Debt Deal

Japanese stocks fell for a third day, sending the Nikkei 225 Stock Average to a two-week low, amid concern Greece’s debt-swap deal will collapse, threatening the country’s bailout.

Mitsubishi UFJ Financial Group Inc., Japan’s top bank by market value, fell 1 percent. Sony Corp. (6758), a consumer electronics maker that gets about 70 percent of its sales overseas, sank 2.4 percent after the yen strengthened, hurting exporters’ earnings outlook. Mitsui & Co., a trading house that counts commodities as its biggest source of income, lost 1.2 percent after oil and metals prices dropped.

“The Greek debt issue and euro region’s negative growth fueled a drop in markets, which were already overheated,” said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd., which oversees the equivalent of $68 billion. “Stocks are correcting after their surge and the yen is adjusting after the currency weakened.”

The Nikkei 225 fell 0.6 percent to 9,576.06 at the 3 p.m. close in Tokyo, its lowest since Feb. 22. The broader Topix (TPX) Index lost 0.6 percent to 822.71, with trading volume 24 percent higher than the 100-day average.

Europe GDP Falls

The Topix (TPX) rose 7.3 percent in the 11 trading days since Feb. 14, when the Bank of Japan surprised investors by increasing its bond purchases. The move helped drive the yen last week to its lowest against the dollar since May.

Futures on the Standard & Poor’s 500 Index (SPXL1) rose 0.3 percent today. The gauge sank 1.5 percent in New York yesterday, its worst drop of the year, after a report the European Union’s gross domestic product shrank 0.3 percent last quarter from the previous period.

Financial stocks declined on concern Greece’s rescue was threatened by reluctant bond holders. Mitsubishi UFJ Financial, the most active stock by value in Japan, slid 1 percent to 404 yen. Nomura Holdings Inc. (8604), the nation’s biggest brokerage, fell 1.9 percent to 361 yen. Dai-Ichi Life Insurance Co. sank 3 percent to 99,500 yen.

Greek Debt Swap

“There’s concern about whether or not there will be enough participants in the Greek debt swap,” Michael Koskuba, who helps oversee $28 million at Victory Capital Management Inc. in New York, said in a telephone interview. “The fear is that if it doesn’t happen the way most want it to happen, there’s potential for a greater recession in Europe.”

Private investors who have so far declared their participation in Greece’s debt restructuring hold about only one-fifth of the bonds involved in the swap, which ends March 8, required for a bailout. The Greek government has set a minimum 75 percent participation rate to proceed.

Exporters declined after the yen rose. Sony lost 2.4 percent to 1,638 yen. Toyota Motor Corp., Asia’s biggest carmaker, slid 1.2 percent to 3,245 yen. Mazda Motor Corp., an automaker that gets more than 70 percent of its revenue overseas, slumped 3.8 percent to 126 yen, the biggest decline on the Nikkei 225. (NKY)

The yen appreciated 105.65 against the euro today in Tokyo, compared with 107.56 at the close of stock trading yesterday. It also strengthened to as low as 80.59 against the dollar from 81.47. A stronger yen cuts the value of overseas income at Japanese companies when repatriated.

Crude Drops

Prices for oil and metals declined. Inpex Corp., Japan’s largest oil explorer by market value, lost 1.1 percent to 550,000 yen. Trading house Mitsui declined 1.2 percent to 1,350 yen.

The price of oil dropped to a two-week low in New York as the European Union offered to restart negotiations with Iran over its nuclear program, reducing the threat of war in the Middle East, source of 30 percent of the world’s crude.

Crude for April delivery fell 1.9 percent to $104.70 a barrel yesterday in New York, the lowest settlement since Feb. 17. The London Metal Exchange Index of prices for six industrial commodities including copper and aluminum sank 2.6 percent yesterday, falling the most since Feb. 10.

-- With assistance from Satoshi Kawano in Tokyo. Editors: Jim Powell, Jason Clenfield.

To contact the reporters on this story: Norie Kuboyama in Tokyo at nkuboyama@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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