Japanese Stocks Decline After Industrial Output Retreats

Japanese stocks fell after a report showed the nation’s industrial production unexpectedly declined in February and as the strengthening yen damped the outlook for exporters’ earnings.

Fanuc Corp. (6954), Japan’s biggest industrial robot maker, slumped 2.9 percent. Panasonic Corp. (6752), a consumer electronics company that gets almost half of its revenue overseas, sank 1.6 percent. Inpex Corp. (1605), Japan’s No. 1 energy explorer by market value, dropped 0.7 percent after oil prices had their biggest decline of the year yesterday. Daiichi Sankyo Co. fell 2.1 percent after Citigroup Inc. cut the drugmaker’s rating on the impact of expiring patents.

“Industrial production dropping when people expected an increase is a huge negative for Japanese stocks, weighing down the market as a whole,” said Ayako Sera, a market strategist at Sumitomo Trust & Banking Co., which manages the equivalent of $302 billion. “The Nikkei is holding above 10,000, acting as a support level.”

The Nikkei 225 Stock Average (NKY) slid 0.3 percent to 10,083.56 at the close in Tokyo, paring its monthly advance to 3.7 percent. The gauge rose 19 percent in the three months ended today, its biggest quarterly advance since June 2009, as the yen weakened and the U.S. showed signs of economic recovery. The broader Topix Index slid 0.4 percent to 854.35, rising 0.2 percent for the week. Trading volume today was 19 percent below its 30-day average.

Manufacturing Drops

Japan’s factory output slid 1.2 percent in February from the previous month, the Trade Ministry said in Tokyo today, after a 1.9 percent gain in January. The median estimate of economists surveyed by Bloomberg News was for a 1.3 percent increase.

Fanuc dropped 2.9 percent to 14,680 yen, the biggest drag on the Nikkei. It also fell after UBS AG recommended selling the stock, citing the company’s premium compared to its peers, high competition and risk of correction in global manufacturing.

Tokyo Electron Ltd. (8035), an industrial electronics products maker, slid 1 percent to 4,735 yen, while Toshiba Corp. retreated 1.9 percent to 364 yen.

Exporters declined after the yen touched 81.83 against the dollar today, strengthening from as low as 83.18 yesterday. A stronger yen reduces overseas income at Japanese companies when repatriated.

Panasonic slumped 1.6 percent to 761 yen. Mazda Motor Corp. (7261), a carmaker that gets more than 70 percent of sales overseas, declined 1.4 percent to 145 yen.

Crude Declines

Energy stocks fell after oil for May delivery slumped 2.5 percent yesterday in New York, the biggest drop since December. Inpex slipped 0.7 percent to 559,000 yen. Japan Petroleum Exploration Co. fell 1.4 percent to 3,855 yen.

Daiichi Sankyo slid 2.1 percent to 1,508 yen after Citigroup cut its rating on the stock, saying patents on its major drugs are close to expiring.

Futures on the Standard & Poor’s 500 Index (SPXL1) rose 0.3 percent. Declines in Japanese shares were limited ahead of U.S. data today estimated to show growth in consumer confidence and spending. The Thomson Reuters/University of Michigan index of consumer confidence for March is expected to rise to near the highest level in a year, according to a Bloomberg survey of economists. Personal income grew 0.4 percent while consumer spending rose 0.6 percent, economists predicated before the release of the data today.

Shares on the Topix are valued at 1.05 times book value, up from 0.88 in December, according to data compiled by Bloomberg. A number less than one means companies can be bought for less than value of their assets.

The Nikkei 225 Volatility Index (VNKY) fell 1.5 percent to 19.42, indicating traders expect a swing of about 5.6 percent on the benchmark gauge over the next 30 days.

“It’s not a bearish case, but you just don’t have sustainability for the markets to reweight higher like they did three or four months ago,” saidAndrew Pease, Sydney-based chief strategist for the Asia-Pacific region at Russell Investment Group, which oversees about $150 billion.

To contact the reporter on this story: Kana Nishizawa in Hong Kong at knishizawa5@bloomberg.net.

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

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