Japan Shares Fall on Low Volume Amid U.S Tapering Concern

Japanese shares fell amid low volume, with the Topix index paring this week’s advance, as improving U.S. economic data fueled concern the Federal Reserve will cut stimulus next month.

J. Front Retailing Co. sank 2.7 percent after reporting a decline in department-store sales. Oil refiner Showa Shell Sekiyu K.K. (5002) slipped 2.2 percent after Mitsubishi UFJ Morgan Stanley Securities Co. cut its rating on the stock. Tokyo Tatemono Co. climbed the most on the Nikkei 225 Stock Average after a report the developer may boost operating profit by 10 billion yen ($102 million) next fiscal year.

The Topix lost 0.8 percent to 1,142.65 at the close in Tokyo, trimming its weekly advance to 0.2 percent. Volume was 26 percent below the 30-day average. The gauge slid for a second day after officials yesterday denied a report the government was mulling cutting corporate taxes. The Nikkei 225 slipped 0.8 percent to 13,650.11, paring its weekly gain to 0.3 percent.

“Investors have lost confidence corporate earnings will be able to withstand tapering in the U.S.,” said Ayako Sera, a Tokyo-based market strategist at Sumitomo Mitsui Trust Bank Ltd., which has the equivalent of $360 billion in assets. “The only way to break the risk-off, stronger-yen, weaker-stocks spiral is to gain confidence in earnings. The Japanese government comments denying a cut in corporate taxes pulled the rug out from under the markets. They’re doing badly in communicating.”

Japanese shares dropped for a second day after officials including Chief Cabinet Secretary Yoshihide Suga said yesterday Prime Minister Shinzo Abe hasn’t given instructions on lowering the rate on companies. The Nikkei newspaper reported on Aug. 13 that Abe had called for a study on cutting the levy as a counterweight to raising the sales tax, citing unidentified people in the government. The Topix (TPX) rallied 2 percent that day.

Thin Trading

Daily trading volume on the Topix fell to the lowest this year on Aug. 12 and remained near that level throughout the week as investors take summer vacations. About 1.9 billion shares were traded today, below the 3.5 billion average for this year. The measure’s 30-day historic volatility was at 26.25 today, compared with its five-year median of 19.42.

Futures on the Standard & Poor’s 500 Index climbed 0.2 percent today. The gauge fell the most since June yesterday as forecasts from Cisco Systems Inc. and Wal-Mart Stores Inc. disappointed while improving economic data pushed bond yields higher amid concern the Fed will reduce stimulus.

Reports yesterday showed claims for jobless benefits unexpectedly dropped last week to the lowest level in almost six years, signaling the U.S. job market continues to mend. The Fed will probably reduce 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.

Tapering Concern

“Some investors are concerned the Fed’s cut in bond purchases could be bigger than expected,” said Nobuhiko Kuramochi, a deputy general manager at Mizuho Securities Co.

All but three of the 33 Topix industry groups declined today, with paper makers and insurers falling the most on the index, and banking and communications shares providing the biggest drag. Miners, brokerages and service companies were the only groups to advance.

Among shares that fell, J. Front Retailing dropped 2.7 percent to 724 yen, closing at its lowest level since June 18. Sales at its department stores fell 3.1 percent from a year earlier in July, the company said yesterday.

Showa Shell Sekiyu K.K. lost 2.2 percent to 928 yen. The oil refiner was cut to neutral from outperform by Mitsubishi UFJ Morgan Stanley yesterday, following downgrades by Daiwa Securities Group Inc. and Citigroup Inc. earlier this week. The company’s share price has almost doubled this year.

Kubota Slides

Kubota Corp., the world’s No. 2 agricultural-machinery maker by market value, slumped for a second day. The tractor maker fell 3 percent to 1,430 yen after larger rival Deere & Co. forecast a decline in U.S. farm revenue. Kubota, which gets 23 percent of sales from North America, sank 3.2 percent yesterday after Deere said U.S. farm cash receipts will drop to $389.8 billion in 2013 and $379.7 billion next year from a record $402.1 billion last year.

Among stocks that rose, Tokyo Tatemono (8804) advanced 2.7 percent to 846 yen. The developer may see an additional 10 billion yen in operating profit in the year ending December 2014 as it adds the results of its special-purpose companies to its consolidated earnings, the Nikkei newspaper reported.

The Topix traded at 1.13 times book value today, compared with 2.44 for the S&P 500 and 1.72 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

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