Japanese Stocks Reverse Advance on Chinese Trade Data, Strengthening Yen

Japanese stocks erased earlier gains, ending a two-day rally, after China posted its largest trade deficit in more than two decades and the yen rebounded from a 10-month low against the dollar, damping the earnings outlook for exporters.

Komatsu Ltd. (6301), a construction machinery maker whose biggest market is China, dropped 1.8 percent. Nippon Paper Group Inc. (3893) paced losses among paper companies after a report that wholesale prices of some high-quality paper declined. Energy explorer Inpex Corp. (1662) led mining companies higher after oil and metals prices gained on March 9.

The Nikkei 225 Stock Average (NKY) fell 0.4 percent to 9,889.86 at the 3 p.m. close in Tokyo after earlier rising above 10,000. The broader Topix (TPX) Index lost 0.4 percent to 845.28 after adding 1.3 percent last week. Stocks gained earlier after U.S. jobs data beat estimates last week.

“The Nikkei may lack momentum to extend gains beyond 10,000,” said Takeru Ogihara, chief strategist in Tokyo at Mizuho Trust & Banking Co., a unit of Japan’s third-largest lender by market value. “Europe’s economy is contracting and China’s economic fundamentals remain dicey with exports being so weak.”

U.S. Jobs Data

Futures on the Standard & Poor’s 500 Index (SPXL1) fell 0.4 percent today. The gauge rose 0.4 percent in New York on March 9 after a 227,000 increase in payrolls last month topped the median projection of economists in a Bloomberg News survey.

China posted its largest trade deficit since at least 1989 last month as Europe’s sovereign-debt turmoil damped exports and imports rebounded after the weeklong Lunar New Year holiday, the government reported on March 10.

Komatsu slid 1.8 percent to 2,320 yen, and Hitachi Construction Machinery Co (6305), a Japanese machinery maker that generates 27 percent of its sales in China, advanced 0.2 percent to 1,781 yen after rising as much as 2.5 percent earlier. A Japanese government report today showed machinery orders gained 3.4 percent in January after falling 7.1 percent in December.

The yen rose against all of its major counterparts today, strengthening to as much as 82.11 against the dollar, after touching 82.65 on March 9, the lowest since April 27. A stronger yen cuts overseas earnings at Japanese companies.

Exporters Fall

Canon Inc. (7751), a camera maker that gets 80 percent of its revenue overseas, lost 1.5 percent to 3,705 yen. Nintendo Co. (7974), the world’s biggest maker of video-game consoles, fell 1.2 percent to 11,540 yen.

Paper companies dropped the most among the Topix’s 33 industry groups after the Nikkei newspaper reported the wholesale price of high-quality light coated paper fell for the first time in a year and half. Nippon Paper lost 4.7 percent to 1,812 yen, and Daio Paper Corp. (3880) dropped 1.4 percent to 548 yen.

The Topix (TPX) has gained 10 percent since March 15 last year, when the measure plunged four days after the record earthquake and tsunami struck Japan’s northeast and caused a nuclear disaster. The gain, buoyed by global monetary easing and reconstruction demand, boosted the value of shares on the index to 1.23 times book value, compared with 1.12 in March 2011.

Bank of Japan

The Bank of Japan is starting two-day meeting at which it’s expected to keep interest rates unchanged, according to 12 of 14 economists surveyed by Bloomberg News. The central bank on Feb. 14 surprised the market by increasing its government bond purchase program and setting an inflation goal of 1 percent, weakening the yen and boosting stocks.

The Federal Reserve is set start a two-day policy meeting today. The Wall Street Journal last week reported the Fed is considering a strategy that would allow it to undertake another round of bond buying, while lowering the risk of inflation.

Mining companies rose after the London Metal Exchange Index of prices for six industrial metals including copper and aluminum rose 1.9 percent on March 9. Oil rose to a one-week high on the same day.

Inpex Corp. (1605), Japan’s No. 1 energy explorer, advanced 1.1 percent to 564,000 yen. Japan Petroleum Exploration Co. climbed 2.9 percent to 4,090 yen.

The Nikkei 225 Volatility Index (VNKY) fell 3.9 percent to 22.94, indicating traders expect a swing of about 7 percent on the benchmark gauge over the next 30 days. Trading volume on the Nikkei was 29 percent above its 100-day average, according to data compiled by Bloomberg.

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

Hi-Lex Corp. (7279) (7279 JO), a manufacturer of control cables, lost 1.6 percent to 1,404 yen. It said net income for the three months ended Jan. 31 fell 18 percent to 1.52 billion yen ($18.5 million) from a year earlier.

Kuraray Co. (3405) (3405 JP), a maker of synthetic and chemical fibers, rose 0.9 percent to 1,210 yen. Its operating profit will likely top 60 billion yen, beating its forecast for a record 57 billion yen, for the year ending March 31, Nikkei newspaper reported.

Panasonic Corp. (6752) (6752 JT), an electronics company, gained 0.7 percent to 740 yen. It said it plans to boost sales of appliances to 1.8 trillion yen in the year ending March 2016 from an estimated 1.3 trillion yen this fiscal year.

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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