Japanese stocks declined, reversing an earlier surge that came after the Bank of Japan added stimulus, as investors interpreted a statement on price gains as a sign an end to deflation may damp prospects for further easing.
Sumitomo Mitsui Financial Group Inc. (8316), Japan’s second- biggest lender by market value, lost 0.4 percent after paring gains of as much as 2 percent. Canon Inc. (7751), a camera maker that depends on Europe for a third of its sales, slid 1.2 percent after Spain’s credit rating was cut, weakening the euro against the yen. Nintendo Co., the world’s largest maker of gaming consoles, sank the most in seven months after forecasting net income that lagged analysts’ expectations.
The Nikkei 225 Stock Average (NKY) fell 0.4 percent to 9,520.89 at the close in Tokyo, after earlier rising as much as 1.4 percent minutes after the central bank made its announcement. Volume on the gauge was almost 25 percent above the 30-day average. The broader Topix Index fell 0.7 percent to 804.27, declining 0.9 percent on the week.
“Investors are worried the BOJ may tighten its monetary policy, not ease it,” said Koichi Kurose, chief economist at Resona Bank Ltd. in Tokyo. “The BOJ statement says that there’s a high probability that the consumer price index will reach 1 percent before long. That’s the most negative part here.”
Shares erased earlier gains after the Bank of Japan said in a statement it would not be long before a 1 percent inflation goal was reached, casting future stimulus in doubt.
Sumitomo Mitsui Financial Group lost 0.4 percent to 2,584 yen. Mitsubishi UFJ Financial Group Inc. (8306), Japan’s biggest lender by market value, dropped 0.3 percent to 387 yen, after earlier surging as much as 3.1 percent.
The BOJ’s asset-purchase fund, its main policy tool since the benchmark interest rate was cut to near zero, is now 40 trillion yen, today’s announcement showed in Tokyo. The central bank also extended the maximum maturity of government bonds purchases in the program to three years. A separate credit facility providing funds to banks was pared by 5 trillion yen.
“The bank has actually scaled back the other main element of the asset purchase program, cutting the amount available under its six-month lending program by 5 trillion yen,” said Julian Jessop, chief global economist at Capital Economics Ltd. in London. “It cited weak demand, but this simply underlines the fact that there is little evidence that Japan’s recovery is being held back by problems with the cost or availability of credit.”
The stimulus came as government reports today showed industrial production rose less than analysts anticipated in March and household spending missed estimates.
Spain Rating Cut
Companies linked to Europe fell after Spain’s credit rating was cut by S&P on concern the nation will have to provide further support to the banking sector. Spain’s borrowing costs have climbed as Prime Minister Mariano Rajoy struggles to implement austerity measures as the economy contracts.
Canon lost 1.2 percent to 3,670 yen. Nippon Sheet Glass slumped 1.9 percent to 104 yen.
Nintendo tumbled 5.6 percent to 10,900 yen, its biggest drop since Sept. 28. The video-game company fell after forecasting a drop in net-income that that missed analysts’ estimates as consumers increasingly play games on mobile devices including Apple Inc.’s iPhone. Nintendo yesterday reported its first annual loss since going public in 1962.
Almost a fifth of the Topix’s 1,665 companies reported earnings this week. Net income grew about 30 percent in the first quarter at 379 companies that reported results since April 10, according to data compiled by Bloomberg.
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