Japan Stocks Decline as China Rules Out Broader Stimulus

Japanese stocks fell, with the Nikkei 225 (NKY) Stock Average snapping a four-day rally, after Spain’s credit rating was downgraded as the nation struggles to rescue its banks, and on reports China has no plans to introduce large- scale stimulus to bolster its slowing economy.

Nintendo Co., a maker of gaming consoles that gets a third of its revenue from Europe, sank 2.4 percent. Fanuc (6954) Corp., a producer of automation controls for Chinese factories, lost 1.2 percent. Renesas Electronics Corp. (6723) soared 27 percent as short- selling in its shares was restricted after a 25 percent slump over the past two days.

The Nikkei 225 fell 0.3 percent to 8,633.19 at the 3 p.m. close in Tokyo, headed for a monthly drop of 7.7 percent. Volume on the gauge was almost 5 percent below the 30-day average. The broader Topix (TPX) index lost 0.5 percent to 723.62, with about nine shares dropping for every seven that gained.

“The European crisis is spreading out to Spain from Greece,” said Kenji Shiomura, a manager at Daiwa Securities Group Inc., Japan’s second-biggest brokerage. “Shares are extremely undervalued, but even so, investors are reluctant to buy, especially in sectors that depend on Europe.”

The value of stocks listed on the Topix has fallen to 0.85 times book value, compared with 2.10 times for the S&P 500 and 1.34 times for the Stoxx 600. A number below one means companies can be bought for less than value of their assets.

The Topix has plunged 17 percent from this year’s high on March 27 as China’s economic growth slowed, and on renewed concern about Europe’s debt crisis. The political gridlock in Greece after an inconclusive election this month reignited concern the nation will renege on austerity pledges required for 240 billion euros ($299 billion) in aid and exit the euro.

Spain Downgraded

Shares fell after Spain’s credit grade was trimmed to B from Bb- by Egan-Jones Ratings Co. The 17-nation currency fell to a two-year low against the dollar on investor concern about Spain’s ability to recapitalize banks, boosting speculation the monetary union’s debt crisis is worsening. The euro weakened to as low as 98.94 yen today in Tokyo, compared with 99.72 yen at the close of trading yesterday.

Nintendo slid 2.4 percent to 9,010 yen. Ricoh Co. (7752), an office-equipment and camera maker that obtains more than 20 percent of its revenue in Europe, sank 3.6 percent to 595 yen.

Stocks also fell on a report China has no plans to introduce stimulus measures on the scale deployed during the global financial crisis to counter the economic slowdown, according to the official Xinhua News Agency.

“The Chinese government’s intention is very clear: It will not roll out another massive stimulus plan to seek high economic growth,” Xinhua said yesterday in a Chinese-language article on economic policy, without attributing the source. “The current efforts for stabilizing growth will not repeat the old way of three years ago.”

China-Linked Shares

Fanuc slipped 1.2 percent to 13,710 yen. Murata Manufacturing Co., an electronic-parts maker that depends on China and Taiwan for about half of its sales, retreated 1.8 percent to 4,160 yen.

“The report completely threw a wet blanket over expectations China may introduce measures to stimulate the economy,” said Daiwa Securities’ Shiomura.

Among companies that fell, Aozora Bank Ltd., the Japanese lender controlled by Cerberus Capital Management LP, declined the most in the Nikkei 225, falling 7.1 percent to 171 yen. The Nikkei newspaper reported the bank withdrew plans to announce a public-fund repayment proposal next month after failing to reach agreement with investors and the government.

Futures on the S&P 500 (SPXL1) fell 0.5 percent today. The gauge advanced 1.1 percent in New York yesterday after home values in 20 U.S. cities fell 2.6 percent in the 12 months ended March, the smallest decrease since December 2010, while the Conference Board’s gauge of consumer confidence unexpectedly dropped.

Renesas

Renesas Electronics, the world’s biggest maker of microcontrollers for cars, surged 27 percent to 260 yen. Japan Securities Finance Co., Japan’s biggest provider of loans for margin trading, restricted short-selling of the stock from today. The shares rebounded after its two-day drop of 25 percent on the company’s plans to raise 100 billion yen ($1.3 billion).

-- With assistance from Adam Haigh in Sydney. Editor: Jim Powell

To contact the reporter 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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.