Japanese shares declined, with the Topix (TPX) Index trimming a weekly gain, after U.S. House Republicans scrapped plans for a vote on taxes, fueling concern lawmakers will fail to reach a deal as time runs out on budget talks.
Toyota Motor Corp. fell 2.5 percent. Sharp Corp., an electronics maker that gets more than half its sales outside the country, slumped 2.3 percent after the yen strengthened against the dollar. Mitsubishi Estate Co. (8802), the country’s biggest developer by market value, gained 2.9 percent after the Nikkei newspaper reported the Bank of Japan may reconsider its objectives for inflation.
The Topix slid 0.7 percent to close at 832.72 in Tokyo. Less than two weeks remain to avert more than $600 billion in automatic spending cuts and tax increases, known as the fiscal cliff, set to start in January. The Nikkei 225 Stock Average slid 1 percent to 9,940.06.
“It’s cutting it quite close,” said Shane Oliver, Sydney- based head of strategy at AMP Capital Investors Ltd., which has almost $130 billion under management. “If they go off the fiscal cliff, the U.S. economy could go into a recession. At stake is the U.S. economy and by implications the global economy.”
Futures on Standard & Poor’s 500 Index dropped 1.6 percent after slumping as much as 3.4 percent today. House Republican leaders canceled a vote today on Speaker John Boehner’s plan to raise tax rates for annual income above $1 million, throwing already-stalled budget talks deeper into turmoil.
Japanese exporters declined as the yen gained against all of its major peers, with gauges tracking transport and electronic makers exerting the biggest drags among the Topix’s 33 industry groups. A stronger currency hurts overseas earnings when repatriated.
Toyota, which counts North America as its biggest market outside Japan, slid 2.5 percent to 3,785 yen. Sharp slumped 2.3 percent to 295 yen. Canon Inc., the world’s biggest camera maker, fell 1.5 percent to 3,305 yen.
For the week, the Topix climbed 4.1 percent, advanced for a sixth week. Shares have risen on confidence a new government will spend more to spur economic growth and press the central bank to add stimulus. The gauge is headed for a 14 percent gain this year, its best yearly performance since 2005.
The Topix traded 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.
Trading volume on the Nikkei 225 was about 72 percent above the 30-day average. The Nikkei Stock Average Volatility Index rose 16 percent to 21.75, indicating traders expect a swing of about 6.2 percent on the benchmark gauge over the next 30 days, the most since July.
Japanese shares gained earlier after purchases of existing U.S homes increased, according to the National Association of Realtors. The data reinforces forecasts that the housing industry is set to contribute to annual economic growth for the first time since 2005.
A separate report from the Commerce Department showed the U.S. economy grew at a 3.1 percent annual rate in the third quarter, compared with a previously estimated 2.7 percent expansion.
“The U.S. data has been very good and it all points toward reasonable growth going forward,” said Oliver at AMP Capital. “We have a tug of war in the share markets, with the flow of positive economic data against the concerns about the fiscal cliff.”
Property developers gained the most among the Topix’s industry groups amid speculation the adoption of an inflation target by the central bank will help lower borrowing costs. Mitsubishi Estate rose 2.9 percent to 1,897 yen. Sumitomo Realty & Development Co., Japan’s third-biggest developer, gained 3 percent to 2,643 yen.
The Bank of Japan may adopt an official inflation target, the Nikkei newspaper reported today. Incoming Prime Minister Shinzo Abe has called for unlimited easing until 2 percent inflation is achieved. The central bank has a goal of 1 percent gains in prices.
“The market continues to expect that the inflation target will be raised to 2 percent,” said Masayuki Doshida, Tokyo- based senior market analyst at Rakuten Securities Inc.
Among other stocks that gained, Tokai Carbon Co. leapt 10 percent to 352 yen after Daiwa Securities Group Inc. raised its investment rating on the company to “buy” on climbing electrode prices and a weaker yen.
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