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Japan Stocks Fall to Two-Month Low as Utilities Slump

Japanese shares declined, with the Nikkei 225 (NKY) Stock Average falling below 13,000 for the first time in two months, as utilities and exporters slumped. A gauge of small-cap stocks fell the most since after the 2011 earthquake.

Tokyo Electric Power Co. (9501), owner of the stricken Fukushima Dai-Ichi nuclear plant, fell for a second day to lead utilities lower. Sharp Corp., which gets 60 percent of its sales outside of Japan, dropped 5 percent on a stronger yen. Komatsu (6301) Ltd. slid 3.9 percent as machinery stocks declined. The Tokyo Stock Exchange Mothers Index of smaller companies tumbled 13 percent for its biggest drop since March 14, 2011.

The Topix index sank 1.8 percent to 1,070.77 at the close of trading in Tokyo, after earlier rising as much as 0.8 percent. About 15 shares fell for each that gained. The Nikkei 225 lost 0.9 percent to 12,904.02, its lowest since April 5.

“Risk money is fleeing,” said Seiichiro Iwamoto, who helps oversee the equivalent of $33 billion at Mizuho Asset Management Co. “With concern that monetary easing will be pared back in the U.S., the yen is being bought and exporters sold. Panic is causing investors to dump shares in small-caps as they continue to fall from their high.”

Foreign investors undertook the biggest net sales of Japanese shares since March last week, according to Ministry of Finance data released today.

Only 121 of the Topix’s 1,709 companies rose. All 33 industry groups fell, led by machinery companies and utilities. Car and consumer-electronics makers were the biggest drags.

U.S. Futures

Futures on the Standard and Poor’s 500 Index rose 0.3 percent today after the gauge dropped 1.4 percent in New York yesterday as jobs and factory data missed estimates and investors speculated when the Federal Reserve will taper bond purchases. The yen touched 98.86 against the dollar today, the strongest since May 9, before later weakening.

Tokyo Electric Power has slumped 23 percent over two days, its biggest such drop since June 2011. Power producers fell yesterday after Prime Minister Shinzo Abe failed to mention any plan to restart reactors taken off-line after the 2011 nuclear meltdown.

Even after the decline, Tepco, as the utility is also known, is still up 131 percent this year and is the best-performing stock in the Nikkei 225.

Sharp, Japan’s third-largest maker of televisions, slumped 5 percent to 401 yen, while rival Sony Corp. lost 2 percent to 1,869 yen. Toyota Motor Corp. slid 1.6 percent to 5,640 yen. Machinery maker Komatsu, which gets 30 percent of its revenue from the Americas, lost 3.9 percent to 2,415 yen.

‘Big Issue’

“The big issue affecting stocks is concern about scaling back monetary easing in the U.S., which is leading to risk-off sentiment and a stronger yen,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of $59.6 billion.

The Topix and Nikkei 225 have rallied about 24 percent this year to make Japan the world’s best-performing major market on optimism unprecedented monetary easing from the Bank of Japan will overcome deflation. Stocks entered a correction on May 30 after the biggest rally in a quarter century. The Topix has fallen 16 percent from its high on May 22.

The TSE Mothers Index has dropped 28 percent from its peak on May 14. The Jasdaq Stock Index of start-up ventures slid 5.3 percent today, while the Tokyo Stock Exchange Second Section Price Index of smaller shares fell 3.8 percent to its lowest since April 4.

Stock prices are swinging the most in more than two years, with a measure of 30-day historic volatility on the Topix jumping to 36.15 today, the highest since immediately after the March 2011 earthquake and nuclear accident. Japan’s broadest equity measure has swung an average of about 3.8 percent daily since May 23, when it had the biggest one-day plunge since the disaster.

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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