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Asian Stocks Fall as Stronger Yen Fuels Japan Growth Concerns

Asian stocks fell, dragging the MSCI Asia Pacific Index lower for a second straight day, on concern a stronger yen will hurt Japan’s economic growth.

Canon Inc., a maker of consumer electronics that gets over 80 percent of its sales outside Japan, dropped 2 percent in Tokyo. Honda Motor Co., a carmaker which receives 46 percent of its sales from North America, lost 2.7 percent. BHP Billiton Ltd., the world’s largest mining company, slipped 1.3 percent as commodity prices slumped.

“The market, which has been watching the yen rising against the euro because of Europe’s deficit crisis, now has to deal with the yen’s rise against the dollar again, too,” said Hiroichi Nishi, an equities manager in Tokyo at Nikko Cordial Securities Inc. “The psychological effects on the stock market will be huge.”

The MSCI Asia Pacific Index sank 0.7 percent to 120.97 as of 9:56 a.m. in Tokyo, adding to yesterday’s 0.1 percent drop. The decline cut the average price of shares in the gauge to 13.8 times estimated earnings.

Japan’s Nikkei 225 Stock Average slumped 1.8 percent. Australia’s S&P/ASX 200 Index fell 0.3 percent. New Zealand’s NZX 50 Index lost 0.4 percent.

Futures on the Standard & Poor’s 500 Index rose 0.1 percent. The gauge fell 1.2 percent yesterday on concern the European debt crisis may worsen after the Wall Street Journal reported bank stress tests published in July understated some financial institutions’ sovereign debt holdings.

Overseas Income

Japanese exporters fell after the yen appreciated to as much as 106.10 against the euro, compared with 107.70 against the euro at the close of stock trading in Tokyo yesterday. Against the dollar, the yen gained to 83.68 per dollar from 84.10, the strongest since May 1995. A stronger yen reduces overseas income at Japanese companies converted into their home currency.

The yen has strengthened 16 percent this year in the biggest gain among 10 developed-world counterparts as investors sought it as a refuge, Bloomberg Correlation-Weighted Currency Indices show. The gains have prompted policy makers to consider measures to curb the currency’s appreciation, which makes Japanese exporters’ products more expensive.

“Japanese exporters are expecting the nation’s currency to be at 90 per dollar and 110 yen for the euro, so this is a harsh situation for its earnings,” Nikko Cordial’s Nishi said.

Commodity stocks dropped after crude oil futures in New York lost 0.7 percent yesterday, the biggest single-day decrease since Aug. 31, on speculation that Europe’s debt crisis may worsen. The London Metal Exchange Index of six metals including copper and zinc lost 0.8 percent yesterday.

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