Japan Stocks Fall on Growth Assessment, Fed Speculation

Japan stocks slid, with the Topix (TPX) Index falling the most in more than three weeks, after the government downgraded its assessment of the economy amid slowing growth in China, and on speculation Federal Reserve Chairman Ben S. Bernanke will refrain from announcing stimulus this week.

Komatsu Ltd. (6301), a construction-machinery maker that gets 14 percent of its sales from China, dropped 2.1 percent. Chubu Electric Power Co. paced declines among utilities after companies in the sector were downgraded by Credit Suisse Group AG. Aozora Bank Ltd. (8304) surged 14 percent, the most since December 2009, on the lender’s plans to repay public funds.

The Topix lost 1.2 percent to 746.30 at the 3 p.m. close in Tokyo, the biggest drop since Aug. 3, with more than five shares falling for each that rose. The Nikkei 225 Stock Average (NKY) slid 0.6 percent to 9,033.29 after rising as much as 0.6 percent earlier. Volume was 6.9 percent above the 30-day average ahead of the Fed’s economic symposium at the end of the week in Jackson Hole, Wyoming.

“Last week, stocks markets rose and the dollar weakened after the Fed’s minutes raised easing speculation, but the markets are short of catalysts to maintain such expectations,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd., which has 33 trillion yen ($420 billion) in assets. “That’s why investors are focusing on Bernanke’s speech in Jackson Hole at the end of this week.”

The Topix has rebounded 7.3 percent from this year’s low on June 4 as central banks around the world ease policy to support growth. The price of shares on the gauge stood at 0.9 times book value, compared with 2.2 times for the Standard & Poor’s 500 Index and 1.5 times for the Europe Stoxx 600 Index. A number less than one means that companies can be bought for less than the value of their assets.

Easing Expectations

Stocks fell on expectations Bernanke won’t announce a third round of quantitative easing at his Aug. 31 speech at Jackson Hole, economists including Michael Feroli of JPMorgan Chase & Co. and James O’Sullivan at High Frequency Economics.

“Markets are now correcting excessive expectations for stimulus,” said Sumitomo Mitsui Trust Bank’s Sera. “Investors will have a hard time deciding whether to buy or sell until they confirm Bernanke’s stance on easing.”

Futures on the Standard & Poor’s 500 Index slid 0.1 percent today. The gauge fell 0.1 percent yesterday in New York as investors awaited indications on whether the Federal Reserve will provide further stimulus.

Shares also fell after Japan’s government downgraded its assessment of the world’s third-biggest economy as some analysts forecast gross domestic product will shrink this quarter as slowing growth in China and recession in Europe hurts demand.

Economic Assessment

Risks include a “further slowing down of overseas economies and sharp fluctuations in the financial and capital markets,” the Cabinet Office said in a monthly report released in Tokyo today.

The yen appreciated to as high as 78.49 against the dollar today in Tokyo, compared with 78.74 at the close of stock trading yesterday. Against the euro, Japan’s currency strengthened to 97.89 from 98.45. A stronger yen cuts overseas income at Japanese companies when repatriated.

Komatsu fell 2.1 percent to 1,630 yen. Nikon Corp., a camera maker counts Europe as its biggest market, slipped 1.5 percent to 2,210 yen.

Chubu Electric Power and Kansai Electric Power Co. declined the most on the Nikkei 225 after Credit Suisse cut the utilities to “neutral” from “outperform,” citing high dependence on nuclear power and concerns about dividend payouts. Chubu Electric sank 10 percent to 920 yen. Kansai Electric lost 10 percent to 594 yen. Power companies declined the most among the Topix’s 33 industry groups.

Aozora Bank gained the most on the Nikkei 225, rising 14 percent to 238 yen after the lender unveiled a plan to spend 227.6 billion yen ($2.9 billion) to repay a taxpayer bailout over 10 years and buy back common stock.

To contact the reporter on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net

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

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