Japanese Stocks Decline on Mounting Greece Aid Concern

Japanese stocks dropped as Greece’s struggle to qualify for aid heightened concern about the euro- area debt-crisis, overshadowing speculation central banks will take more action to boost economic growth.

Makita Corp., a power-tool maker that gets 42 percent of its sales in Europe, slid 1.9 percent. Panasonic Corp. retreated 1.7 percent as the electronics company’s credit ratings were cut by Moody’s Investors Service. Toyota Motor Corp. led declines among automakers after Japanese car sales in China slowed amid heightened political tensions between the nations.

The Nikkei 225 Stock Average (NKY) slid 0.7 percent to 8,807.38 at the close of trading in Tokyo. Volume was 17 percent below the 30-day average. The broader Topix (TPX) Index declined 0.7 percent to 732.26, with more almost two shares falling for each that rose. Stocks also fell amid opposition to the European Stability Mechanism, a bailout fund for the euro region.

“There’s still a lot of uncertainty around the implementation of policy in Europe,” said Stephen Halmarick, Sydney-based head of investment markets research at Colonial First State Global Asset Management, which oversees about $150 billion. “The German constitutional court ruling on ESM is obviously a key risk over the next few days and there’s talk about Greece struggling to come out with budget cuts.”

The Topix dropped 16 percent from this year’s peak on March 27 through yesterday on concern Europe’s debt crisis is deepening and as growth slows in China and the U.S. The gauge trades at 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index and 1.5 for the Stoxx Europe 600 Index. A number below one means companies can be bought for less than the value of their assets.

Rescue Fund

Germany’s Federal Constitutional Court is due tomorrow to rule on the country’s participation in the European rescue fund, while Greek politicians meet amid an impasse on spending cuts needed for a bailout. Investors are also waiting to see if the Federal Reserve will take steps to boost the economy at a meeting this week after U.S. jobs growth trailed estimates.

Shares linked to Europe fell. Makita lost 1.9 percent to 2,752 yen. Nintendo Co., a gaming-console maker that relies on the region for 34 percent of its revenue, slid 0.7 percent to 8,740 yen.

Futures on the S&P 500 fell 0.2 percent today. The gauge lost 0.6 percent in New York yesterday as Greek Prime Minister Antonis Samaras met officials from the nation’s creditors after failing to secure agreement from coalition partners on spending cuts needed to secure a rescue.

Panasonic slid 1.7 percent to 534 yen after its long-term rating was cut to Baa1 from A2 by Moody’s, which cited weak earnings and higher debt. The electronics maker joins Sony Corp. and Sharp Corp. in restructuring as a strong yen erodes earnings and amid competition with South Korea’s Samsung Electronics Co.

Automakers Slide

Carmakers declined after their sales in China slowed last month after a dispute over an island soured diplomatic ties. Chinese auto sales in August rose 11 percent from a year earlier, missing estimates.

Toyota retreated 1.7 percent to 3,170 yen. Nissan Motor Co. slid 0.9 percent to 741 yen.

The Nikkei Stock Average Volatility Index (VNKY) gained 3.3 percent to 19.25, indicating traders expect a swing of about 5.5 percent during the next 30 days.

To contact the reporters on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net; 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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