Japan Stocks Fall as Yen Strengthens After BOJ Decision

Japan’s shares fell, with the Nikkei 225 (NKY) Stock Average falling from an eight-month high, as the yen strengthened even after the Bank of Japan expanded its asset- purchase program.

Canon Inc., the world’s biggest camera maker, sank 2.9 percent to 3,355 yen. Capcom Co. plunged 12 percent after the gamemaker cut its profit forecast and delayed the release of a new title. Mitsubishi Motors Corp. (7211) sank 5.5 percent after the transport ministry warned the automaker for being “passive” after a fourth round of recalls. Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, led banks higher on optimism the nation’s new leadership will push for reflation.

The Nikkei 225 fell 1.2 percent to 10,039.33 at the close in Tokyo after after reaching its highest level since March 28 yesterday and topping 10,000 for the first time since April. Volume on the gauge was 90 percent higher than the 30-day average. The broader Topix Index slid 0.1 percent to 838.61 after rising as much as 0.8 percent.

“The results from the Bank of Japan meeting were as expected,” said Eisuke Shigemura, head of equities at Tokio Marine & Nichido Life Insurance Co., which oversees about $47 billion in Tokyo. “There is a sense of overheating on Japanese stocks so we’re seeing a break after some big gains.”

The Nikkei 225’s 14-day relative strength index was at 78.46 today, trading above the 70 level for a seventh day. Some traders interpret a reading above 70 as an indication the market is overbought.

BOJ Decision

The Topix earlier reversed declines after the Bank of Japan (8301) expanded its asset-purchase program for the third time in four months, and said it will reconsider its 1 percent inflation goal as incoming Prime Minister Shinzo Abe urges a doubling of the target to end price declines.

Standard & Poor’s 500 Index futures were little changed today. The gauge slid 0.8 percent yesterday as deteriorating federal budget negotiations fueled concern that $600 billion in automatic tax increases and spending cuts will be triggered if a compromise is not reached by the end of the year.

White House Communications Director Dan Pfeiffer said President Barack Obama would veto a Republican tax-and-spending proposal because it would put “too big a burden on the middle class.” House Speaker John Boehner’s plan would raise taxes on income over $1 million rather than the $400,000 threshold the president proposed. Lawmakers may vote today on Boehner’s plan.

Japanese exporters declined, with transport and electronic makers the biggest drags among the Topix’s 33 industry groups.

Canon fell 2.9 percent to 3,355 yen. Honda Motor Co., an automaker that counts North America as its biggest market, slid 1.8 percent to 3,015 yen. Nissan Motor Co. tumbled 7.4 percent to 782 yen. Nomura Holdings Inc. also reduced Nissan’s investment rating on concerns the company may miss its profit target on higher costs and slower sales.

Yen Climbs

The yen gained against all of its major peers today. The currency rose 0.5 percent to 84 against the dollar and 0.6 percent to 111.02 to the euro. A stronger yen hurts overseas earnings for Japanese exporters when repatriated.

Among other stocks that fell today, Capcom tumbled 12 percent to 1,300 yen. The video-game company reduced its operating-profit target by 37 percent to 10 billion yen, citing weakening sales of “Resident Evil 6” and pushing the release of “Monster Hunter 4” into next year. The stock was downgraded to equalweight from overweight at Barclays Plc.

Mitsubishi Motors dropped 5.5 percent to 86 yen, the third- biggest decline on the Nikkei 225. The transport ministry said the automaker made “inappropriate decisions” in regards to a series of recalls tied to an oil leak. The company said it will call back eight models, including the Town Box and the Minica minicar, for a total of 1.21 million vehicles in Japan.

Banks Advance

Among stocks that gained, Mitsubishi UFJ rose, leading banks higher. Sumitomo Mitsui Financial Group Inc., Japan’s third largest lender, rose 0.8 percent to 3,035 yen.

“Banks are rising because of market expectations for pressure on the BOJ to continue easing and the new government’s efforts to reflate the economy, which will benefit lenders,” said Hidehiro Tomioka, who helps oversee $1.2 billion at Manulife Asset Management (Japan) Ltd. in Tokyo.

The Topix trades at 0.99 times book value, compared with 2.1 for the S&P 500 and 1.5 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.

The Nikkei Stock Average Volatility Index climbed 1.5 percent to 19.08, indicating traders expect a swing of about 5.4 percent on the benchmark gauge over the next 30 days.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net

To contact the editor responsible for this story: John McCluskey at j.mccluskey@bloomberg.net

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