Japan’s Topix Index Declines on Stronger Yen, U.S. Drop

Japanese stocks fell, with the Topix (TPX) index capping its biggest decline since August, after the yen climbed to a seven-week high and U.S. equities tumbled on concern that the global economy’s recovery will falter.

Nissan Motor Co. (7201), a carmaker that gets about 80 percent of its revenue abroad, dropped 2.6 percent. Advantest Corp., a maker of semiconductor-testing devices and electronic measuring instruments, slid 6.1 percent on a newspaper report that it probably had an operating loss. Daiichi Sankyo Co. lost 4.3 percent after the drugmaker’s rating was cut at Mizuho Securities Co.

The Topix decreased 2.8 percent to 1,229.23 in Tokyo, the lowest close since Dec. 16 and the steepest drop since Aug. 7. All of the measure’s 33 industry groups fell. The Nikkei 225 Stock Average lost 2.5 percent to 15,005.73, with all but six stocks on the gauge falling. The Tokyo Stock Exchange Mothers Index of smaller stocks declined 5 percent. The yen touched its highest level since Dec. 6 versus the greenback today.

“A stronger yen directly triggered this selloff,” said Tetsuo Seshimo, a Tokyo-based portfolio manager at Saison Asset Management Co., which oversees about 81 billion yen ($790 million). “Optimism among global stock investors is waning.”

The Topix slid 5.6 percent this year amid concern that economic growth is slowing in China and as the U.S. Federal Reserve cuts stimulus, spurring demand for the yen as a haven. The Japanese equity measure jumped 51 percent in 2013 as Prime Minister Shinzo Abe and the Bank of Japan took steps to end 15 years of deflation.

Trade Deficit

Japan reported a record annual trade deficit last year as energy shipments and weakness in the yen pumped up the nation’s import bill. The shortfall was 11.5 trillion yen, almost double the previous year’s 6.9 trillion yen, a finance ministry report showed in Tokyo today. Imports rose 25 percent in December from a year earlier and exports gained 15 percent, leaving a monthly deficit of 1.3 trillion yen.

Exporters fell. A stronger yen cuts the value of their overseas earnings. Nissan lost 2.6 percent to 908 yen. Komatsu Inc., a maker of construction machinery that generates about 80 percent of its revenue outside Japan, dropped 3.9 percent to 2,027 yen. Fast Retailing Co. (NKY), Asia’s biggest apparel chain and the heaviest-weighted stock on the Nikkei 225, slid 1.6 percent to 37,600 yen.

Futures on the Standard & Poor’s 500 Index gained 0.1 percent today. The equity measure slumped 2.1 percent on Jan. 24, the most since June 20, as a selloff in developing-nation currencies stoked concern global markets will become more volatile. The policy-setting Federal Open Market Committee starts a two-day meeting tomorrow.

China Data

A private gauge released last week by HSBC Holdings Plc and Markit Economics signaled a contraction in China’s manufacturing industry this month. The Chicago Board Options Exchange Emerging Markets ETF Volatility Index rose 40 percent to 28.26 last week, the biggest increase since September 2011, according to data compiled by Bloomberg.

More than 500 companies on the Topix report earnings this week, with about 640 filing results next week, according to data compiled by Bloomberg.

Advantest fell 6.1 percent to 1,207 yen after the Nikkei newspaper reported that it probably had an operating loss of about 20 billion yen for the nine months ended Dec. 31.

Daiichi Sankyo lost 4.3 percent to 1,703 yen after it was downgraded to neutral from buy at Mizuho. The target price was cut to 1,850 yen from 2,350 yen.

Among stocks that rose, M3 Inc., a provider of online medical information services, surged 11 percent to 317,500 yen after saying its net income jumped 42 percent for the nine months through Dec. 31. Its rating was raised to buy from neutral at Ichiyoshi Research Institute Inc.

Pension Fund

The world’s biggest pension fund said it won’t add to its holdings of Japanese government bonds because it sees “very limited room” for prices to rise as inflation accelerates.

“We won’t buy more JGBs,” Takahiro Mitani, president of the Government Pension Investment Fund, which manages 124 trillion yen in assets, said in an interview in Davos, Switzerland. “With inflation picking up, the room for JGB prices to increase is very limited. When the ones we hold mature, we will consider investing in other assets.”

Japanese stocks and foreign equities and bonds are among assets that the fund will look into, said Mitani.

The Topix traded at 1.25 times book value as of today, compared with 2.57 for the S&P 500 and 1.80 for the Stoxx Europe 600 Index on Jan. 24. Volume on the Japanese gauge was 23 percent higher than the 30-day average today.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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

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