Japan Shares Fall Amid Stronger Yen, Fed Stimulus Concern

Japanese shares fell, with the Topix (TPX) index halting a two-day gain, as exporters retreated after the yen strengthened and amid increased expectations the U.S. Federal Reserve will reduce stimulus in September.

Toyota Motor Corp., Asia’s biggest carmaker, lost 1.6 percent. Kubota Corp., a tractor maker that gets 23 percent of its sales from North America, dropped 3.2 percent after rival Deere & Co. forecast a decline in U.S. farm revenue. Mitsui O.S.K. Lines Ltd. led gains by marine-transport shares after a measure of shipping rates rose the most since October. Mobile-game site operator Gree Inc. surged 13 percent after operating profit beat estimates.

The Topix lost 1.7 percent to 1,151.82 at the close of trading in Tokyo, with all industry groups except shippers declining. Volume on the measure was about 21 percent lower than the 30-day average. The gauge increased 3.2 percent in the previous two sessions. The Nikkei 225 Stock Average slipped 2.1 percent to 13,752.94.

“Investors are taking profit partly because of the concerns about tapering, but also because we’ve had a weaker yen the past few days and stocks were up,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which oversees the equivalent of $6.5 billion. “If the Fed begins tapering when the economy still isn’t very strong, then even though Japanese stocks should benefit as the yen will likely weaken, the market may be unable to avoid risk-off sentiment if U.S. stocks plunge.”

Tax Debate

Japanese shares extended losses after Chief Cabinet Secretary Yoshihide Suga said Prime Minister Shinzo Abe has not given instructions on lowering the corporate tax rate. The Nikkei newspaper reported on Aug. 13 that Abe had called for study on cutting the levy on businesses as a counterweight to raising the sales tax, citing unidentified people in the government. The Topix rallied 2 percent that day.

Finance Minister Taro Aso said today the country’s second-quarter gross domestic product data supports the case for raising the sales tax. The prime minister didn’t request consideration of a corporate-tax cut, Aso also said. Lowering that levy would have only limited economic impact, he said.

“The market had been expecting a increase in the consumption tax to be paired with a decrease in the corporate tax,” said Masanori Ikunaga, a Tokyo-based fund manager at Sumitomo Mitsui Asset Management Co., which oversees the equivalent of $111 billion. “Not only has uncertainty about raising the sales tax increased because of these comments from the government, but we’ve also lost hope of a cut in the corporate-tax rate.”

Stimulus Poll

Futures on the Standard & Poor’s 500 Index slipped 0.2 percent today. The gauge lost 0.5 percent yesterday, falling for a sixth time in eight days, after economists predicted the Fed will reduce stimulus next month as European data added to signs the global economy is strengthening.

The U.S. central bank will probably cut its $85 billion in monthly bond purchases at its meeting on Sept. 17-18, according to 65 percent of economists surveyed by Bloomberg from Aug. 9 to Aug. 13. In a survey last month, half of economists predicted a reduction in September.

Data yesterday showed the euro area emerged from a record-long recession in the second quarter, led by Germany and France. Gross domestic product expanded 0.3 percent after a 0.3 percent contraction in the first quarter, the European Union’s statistics office said. The region’s economy had contracted for six quarters, the longest slump since the euro’s debut in 1999.

Exporters Drop

The yen rose as much as 0.6 percent today to touch 97.59 against the dollar. Electronics manufacturers and carmakers were the biggest drags on the Topix.

Toyota, which gets 31 percent of sales from North America, slid 1.6 percent to 6,310 yen. Honda Motor Co., which counts the region as its biggest source of revenue, dropped 1.2 percent to 3,810 yen. Canon Inc., the world’s biggest camera maker, slipped 1 percent to 3,115 yen.

“Investors are skeptical about whether the Fed should begin tapering in September if concerns remain about the strength of the U.S. economy,” said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management Co. in Tokyo. “If economic data is mixed and they go ahead with tapering, it’s likely to lead to a stronger yen” as investors buy the currency as a haven asset.

Kubota slid 3.2 percent to 1,474 yen. Deere, the world’s No. 1 agricultural-equipment maker, forecast U.S. farm cash receipts will retreat to $389.8 billion in 2013 and $379.7 billion next year from a record $402.1 billion last year as crop prices weaken.

Shipping Rates

The Topix Maritime Transport Index gained 1.9 percent today. Japan’s biggest shippers climbed after the Baltic Dry Index (BDIY) jumped 5.3 percent for the biggest advance since October.

Mitsui O.S.K. jumped the most on the Nikkei 225, rising 3.6 percent to 406 yen. Kawasaki Kisen Kaisha Ltd. added 1.9 percent to 220 yen and Nippon Yusen K.K. climbed 1 percent to 297 yen.

Gree jumped 13 percent to 963 yen, the second-biggest advance on the Topix. The company reported full-year operating profit of 48.6 billion yen, beating the 47.3 billion yen estimate of 21 analysts compiled by Bloomberg.

Foreign investors, which account for 64 percent of trading value on Japan’s stock markets, were net sellers of Japanese stocks for a third week as of Aug. 9, selling a net 101 billion yen, according to the Tokyo Stock Exchange.

Daily trading volume on the Topix fell to the lowest this year on Aug. 12 and has remained near that level as investors take summer vacations. About 2 billion shares were traded today, below the about 3.5 billion average for this year. The measure’s 30-day historic volatility was at 26.62 today, compared with its five-year median of 19.42.

The Topix traded at 1.1 times book value today, compared with 2.48 for the S&P 500 and 1.73 for the Stoxx Europe 600 Index yesterday.

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