Japanese Stocks Fall as Utilities Decline on Quake Risk

Japanese stocks fell, with the Topix Index retreating for a second day from a seventh-month high, as utilities dropped after regulators said an active earthquake fault may be running under a nuclear reactor.

Kansai Electric Power Co. led declines among electricity producers after the Nuclear Regulation Authority said earthquake risk may prevent the restart of a reactor operated by Japan Atomic Power Co. Nintendo Co. sank 4.8 percent in Osaka, dropping for a second day after debuting a new game console in Japan. Sharp Corp. advanced 6.9 percent after reports the electrical appliance maker will receive loans as it tries to return to profit.

The Topix lost 0.3 percent to close at 786.07 in Tokyo, with about two stocks falling for each that advanced. The gauge closed on Dec. 7 at its highest level since May 2 as investors bet elections this month will bring to power an opposition party calling for more economic stimulus measures. The Nikkei 225 Stock Average (NKY) fell 0.1 percent to 9,525.32 today.

“Prospects for restarting the nuclear reactors are slowly being squashed, and that’s going to increase the cost of electricity,” said Ayako Sera, a market strategist at Sumitomo Mitsui Trust Bank Ltd. in Tokyo, which has about $400 billion in assets. “Raw-material companies such as metals producers will probably be the most heavily affected by rising electricity costs. If electricity costs rise, it’s going to be harsh for them.”

Japan Elections

Futures on the Standard & Poor’s 500 Index declined 0.2 percent today. The gauge gained less than 0.1 percent yesterday after economic data in China beat estimates and as investors weighed prospects for a U.S. budget deal.

The Federal Reserve starts a two-day meeting today. Dealers that trade securities with the central bank expect it to begin buying as much as $45 billion a month in Treasuries and to keep benchmark interest rates about zero into 2015, according to Bloomberg News surveys.

The Topix (TPX) typically rallies in the 20 days leading up to elections and drops immediately after, according to calculations based on closing levels before and after elections dating back to 1972. The measure has advanced more than 8 percent since Nov. 14 when Prime Minister Yoshihiko Noda called for elections on Dec. 16. Stocks gained as the yen weakened on bets the opposition Liberal Democratic Party will win and call for more monetary easing.

The Topix traded at 0.9 times book value today, compared with 2.1 for the S&P 500 and 1.5 for the Europe Stoxx 600 Index. A number less than one means companies can be bought for less than the value of their assets.

Nuclear Concerns

Kansai Electric Power dropped 4.4 percent to 742 yen, the biggest drop on the Nikkei 225. Chubu Electric Power Co. (9502), the second-largest decliner, slid 4.1 percent to 1,041 yen. Tokyo Electric Power Co. fell 1.4 percent to 138 yen.

The Nuclear Regulation Authority raised the possibility an active faultline may run directly beneath Japan Atomic Power’s Tsuruga No. 2 reactor. The investigation team is unable judge the reactor as safe in its current condition, said Shunichi Tanaka, the head of the investigation team.

“The power suppliers are pulling the stock market back today,” said Takuya Takahashi, deputy head of research at Daiwa Securities Co. “There isn’t that much news in the market right now, so the utilities are having a big effect on the market.”

Nintendo sank 4.8 percent to 8,800 yen, the second-biggest drag on the Topix. The game maker released its Wii U home video- game console on Dec. 8. The company may face a challenge from its own handheld players, besides competition from smartphones and tablet computers such as Apple Inc.’s iPhone and iPad, said Tomoaki Kawasaki, a Tokyo-based analyst at Iwai Cosmo Holdings Inc.

The Nikkei Stock Average Volatility Index lost 3 percent to 17.34 today, indicating traders expect a swing of about 4.9 percent on the benchmark gauge over the next 30 days.

Sharp, Sumco

Among stocks that rose, Sharp advanced 6.9 percent to 218 yen, the biggest gain on the Nikkei 225. (NKY) Resona Holdings Inc. will join Japanese lenders offering 360 billion yen ($4.4 billion) of emergency loans to the TV maker, three bank officials with knowledge of the matter said, asking not to be named because the discussion is confidential.

Sumco Corp. rose 5.4 percent to 717 yen, extending yesterday’s 17 percent gain and posting the second-biggest advance on the Nikkei 225. The maker of silicon wafers increased after Daiwa Securities raised its investment rating on the company to “outperform” from “neutral” on prospects for higher demand for tablet computers. Bank of America Merrill Lynch yesterday boosted its outlook for the company on prospects for an increase in wafer prices.

To contact the reporter on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net

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

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