Japan Stocks Fall as Yen Strengthens Before BOJ Meeting

July 11 (Bloomberg) -- Japanese stocks fell for a fifth day, with the Nikkei 225 Stock Average (NKY) capping its longest losing streak in three months, after the yen rose to a five-week high against the euro, damping the earnings outlook for exporters as the Bank of Japan starts a two-day policy meeting today.

Sony Corp. (6758), a consumer-electronics company that gets 20 percent of its sales in Europe, fell 2.2 percent. Inpex Corp., Japan’s No. 1 energy explorer, slid 2.2 percent after crude fell. Advantest Corp. (6857), a maker of memory-chip testers, declined 3.3 percent after chip-equipment provider Applied Materials Inc. cut sales and profit forecasts.

The Nikkei 225 Stock Average dropped 0.1 percent to 8,851.00 at the 3 p.m. close in Tokyo. Trading volume was 17 percent below the 30-day intraday average. The broader Topix Index slid 0.2 percent to 757.29, with 22 of its 33 industry groups retreating. Shares pared losses on speculation China will boost investment to shore up growth.

“The market is reflecting concerns an economic slowdown, especially in developing nations, will damage exporters,” said Goya Nakao, a senior investment manager at Sompo Japan Nipponkoa Asset Management Co., which oversees about 5 trillion yen ($63 billion). “The yen’s level is within companies’ estimates, but there’s a lingering upside risk for the currency.”

The Topix rebounded about 9 percent since June 4, when it closed at its lowest since 1983, after euro leaders agreed to ease bailouts for lenders and as speculation mounted central banks around the world will ease policy.

The gain has boosted the average price of shares on the Japanese gauge to 0.9 times book value, compared with 2.1 times for the Standard & Poor’s 500 Index and 1.4 times for the Europe Stoxx 600 Index. A number below one means investors can buy companies for less than the value of their assets.

Yen Strengthens

The yen touched 97.10 against the euro today, the highest since June 5, and rose to 79.21 per dollar yesterday, the strongest since June 29. Japanese manufacturers expect the currency to trade at an average of 78.95 against the greenback through March, according to the Tankan survey released July 2. A stronger yen cuts the value of overseas earnings when repatriated and weighs on Japan’s export-driven economy.

Exporters to Europe and the U.S fell. Sony slid 2.2 percent to 1,023 yen. Komatsu Ltd. (6301), a construction machinery maker that gets 34 percent of its sales in the Americas and Europe, dropped 0.9 percent to 1,801 yen.

With the Bank of Japan meeting closing tomorrow, 10 of 17 analysts surveyed by Bloomberg News expect no change to monetary policy after sentiment among large manufacturers improved to minus 1 in the quarter ended June from minus 4 the previous period, the Bank of Japan’s Tankan survey showed last week. The central bank raised the economic assessment of all Japan’s nine regions for the first time since October 2009.

China Growth

Shares pared losses as Chinese Premier Wen Jiabao said the country needs to maintain “a certain amount” of economic growth, according to a State Council statement posted on the central government’s website yesterday. He called for private investments in railway, public utilities, energy and telecommunication companies, health care and education.

Energy shares slid as crude oil for August delivery declined $2.08 to settle yesterday at $83.91 a barrel on the New York Mercantile Exchange. Inpex Corp. (1662) lost 2.2 percent to 437,000 yen. Japan Petroleum Exploration Co. dropped 3.7 percent to 2,958 yen.

The Nikkei 225 Volatility Index (VNKY) fell 5.1 percent to 18.80, indicating traders expect a swing of about 5.4 percent on the benchmark gauge over the next 30 days.

Semiconductor-related shares fell after Applied Materials cut its fiscal 2012 sales and profit forecasts amid weakness in Europe and China. For the year through October, sales won’t reach the previous projection of $9.1 billion to $9.5 billion, the Santa Clara, California-based company said yesterday.

Advantest dropped 3.3 percent to 1,100 yen. Renesas Electronics Corp. (6723), a chipmaker, declined 7.9 percent to 291 yen.

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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