Japan Shares Fall on Earnings, Stronger Yen as BOJ Meets

Japanese shares fell, with the Nikkei 225 Stock Average tumbling the most in almost two months, as exporters slipped after the yen touched a six-week high to the dollar and earnings disappointed investors.

Toyota Motor Corp., Asia’s biggest carmaker, lost 2.4 percent as the yen advanced for a fourth day. IHI (7013) Corp., a manufacturer of jet engines and ships, dropped 5.8 percent after its earnings forecast missed estimates. Pioneer Corp. tumbled 8.7 percent as the car-stereo maker cut its profit outlook by 92 percent. Oil refiner Showa Shell Sekiyu K.K. rose 3.7 percent after almost doubling its net-income projection.

The Nikkei 225 retreated 4 percent to 13,824.94 at the close in Tokyo, its biggest decline since June 13. Just six companies advanced. The Topix lost 3.2 percent to 1,155.26, with all 33 industry groups dropping. Volume was 10 percent below the 30-day average. The Bank of Japan started a two-day policy meeting today.

“Investors are liquidating their ‘short-the-yen, buy-Japanese-stocks’ positions and becoming more neutral on the country’s equities,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s second-biggest lender by market value. “Some investors are taking their summer breaks and the market lacks energy. It’s likely to remain lackluster for a while.”

Even after falling for the past three months, the Topix is still up 34 percent this year, retaining Japan’s position as the world’s best-performing developed equity market. The measure has risen amid optimism Prime Minister Shinzo Abe will push through reforms while the BOJ provides record stimulus.

Share Swings

Volatility has been high amid thin trading volume as investors weigh Abe’s stimulus policies against concern China’s economy is slowing and prospects the U.S. will end bond-buying. The Topix moved an average of 2.4 percent a day last week, the biggest fluctuations since June. Historical volatility over the last 90 days, which includes May and June when the index plunged more than 18 percent, reached the highest last week since 2009.

“While we’re in this vacation season and the market is thin, intraday trading is likely to be choppy,” said Masaru Hamasaki, a senior strategist at Tokyo-based Sumitomo Mitsui Asset Management Co., which oversees about $111 billion. “But volatility on a market-close basis may begin to tail off.”

A gauge of implied volatility on the Nikkei 225, calculated using futures and options prices, fell 37 percent today from a June high, suggesting investors expect swings to decline.

BOJ Meeting

Futures on the Standard & Poor’s 500 Index lost 0.3 percent. The gauge yesterday posted its biggest decline since June 24, as the trade deficit narrowed to the lowest since 2009, fueling concern the Federal Reserve may reduce its bond purchases this year.

The BOJ will probably keep policy unchanged tomorrow at the conclusion of its meeting, according to all 26 economists surveyed by Bloomberg News. Twenty of the analysts expect more stimulus in the next 10 months as Governor Haruhiko Kuroda and his colleagues seek to achieve 2 percent inflation. Consumer prices excluding fresh food, the BOJ’s preferred measure of inflation, rose 0.4 percent in June.

Exporters declined as the yen strengthened. The 120-day correlation between gains in Japan’s currency and declines in the Topix was at its strongest today since at least 2000, according to data compiled by Bloomberg.

Toyota Motor, which said a one-yen decline against the dollar boosts operating income by 40 billion yen, fell 2.4 percent to 6,230 yen. Canon Inc. (7751), the world’s largest camera maker, slipped 2.5 percent to 3,130 yen.

Pioneer Tumbles

Amid companies retreating after reporting earnings, Pioneer plunged 8.7 percent to 178 yen, the lowest since April 5, as the company cut its full-year profit forecast by 92 percent to 500 million yen ($5.1 million) on slumping domestic sales. The Kanagawa-based audio-equipment maker has dropped 39 percent from a recent high on May 14.

IHI tumbled 5.8 percent to 409 yen for its biggest loss since May 23. The maker of rocket-propulsion systems raised its net-income forecast 28 percent to 23 billion yen, short of the 26.6 billion-yen median estimate.

Profits have increased 91 percent at the 1,253 Topix (TPX) companies that have reported quarterly earnings, according to data compiled by Bloomberg. Of the 213 companies on the gauge that posted results for which Bloomberg has estimates, 60 percent beat projections.

Among stocks that rose, Showa Shell climbed 3.7 percent to 961 yen for the biggest gain on the Nikkei 225. The refiner raised its profit forecast 85 percent to 48 billion yen. The stock also rose as the company said it would build a 49-megawatt biomass plant outside Tokyo.

Sumitomo Seika Chemicals Co. advanced the most on the Topix, surging 20 percent to 478 yen. The Osaka-based company raised its profit forecast 50 percent to 4.5 billion yen after first-quarter net income more than tripled to 1.6 billion yen.

The Topix traded at 1.21 times book value today, compared with 2.49 for the S&P 500 and 1.69 for the Stoxx Europe 600 Index yesterday.

To contact the reporters on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net; Masaaki Iwamoto in Tokyo at miwamoto4@bloomberg.net; Masahiro Watanabe in Tokyo at mwatanabe47@bloomberg.net

To contact the editor responsible for this story: Sarah McDonald at smcdonald23@bloomberg.net

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.