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Japan Stocks Snap Two-Day Gain on Europe Concern Returns

April 16 (Bloomberg) -- Japanese stocks fell, with the Nikkei 225 Stock Average falling the most in about two weeks, after the rising cost of insuring against a Spanish default signaled concern Europe’s debt crisis is spreading and U.S. consumer confidence dropped, hurting exporters’ prospects.

Canon Inc., a camera maker that relies on Europe and the Americas for nearly 60 percent of sales, fell 2.4 percent. Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender by market value, followed a global drop in banking shares amid concern the European debt crisis may hurt the world financial system. Apparel maker TSI Holdings Co. slumped 11 percent after forecasting a loss.

The Nikkei 225 dropped 1.7 percent to 9,470.64 at the 3 p.m. trading close in Tokyo, its biggest loss since April 4. About five stocks declined for each that gained on the gauge. The broader Topix Index fell 1.4 percent to 803.83 after losing 1.2 percent last week. Twenty eight of the 33 industry groups on the gauge fell today.

“A rescue for Spain would be huge if it actually happens, and it could make the crisis worse than last year,” said Masaru Hamasaki, who helps oversee the equivalent of about $22 billion as chief strategist at Toyota Asset Management Co. in Tokyo. “The market may fall into a downtrend if the Nikkei can’t rebound to about 9,800 yen.”

The Nikkei 225 gained 12 percent this year on signs of strength in the U.S. economy and policy easing around the world, including the Bank of Japan’s extension of government bond purchases.

Futures on the Standard & Poor’s 500 Index fell 0.2 percent today. The gauge lost 1.3 percent in New York on April 13, capping its first back-to-back weekly decline since November, as confidence among U.S. consumers cooled in April from a one-year high.

Spain Debt Concern

Stocks also fell after five-year credit-default swaps for Spain surged to a record as Prime Minister Mariano Rajoy struggles to prevent the nation from becoming the fourth euro-region member to need a bailout. The euro capped its second weekly loss against the yen last week, hurting the earnings outlook of Japanese companies that export to the region.

“Concern is mounting about the Spanish bond sales this week, with yields rising and credit-default swaps extending a record,” said Toshiyuki Kanayama, a market analyst at Tokyo-based Monex Inc.

Companies that do business in in the U.S. and Europe fell. Canon lost 2.4 percent to 3,700 yen. Toyota Motor Corp., a carmaker that counts North America as its biggest market, declined 1.7 percent to 3,270 yen. Nintendo Co., a maker of gaming consoles that generates 41 percent of its sales in Europe, dropped 3.2 percent to 11,220 yen.

Banking Stocks Drop

Financial shares fell ahead of European officials’ trip to Washington this week in search of a larger global war chest to fight the region’s debt crisis. The matter is expected to dominate talks at the International Monetary Fund’s spring meeting in Washington from April 20-22.

Mitsubishi UFJ slid 3.5 percent to 388 yen. Mizuho Financial Group Inc., Japan’s third-largest bank by market value, fell 3.1 percent to 127 yen.

Among other declining stocks, TSI Holdings slumped 11 percent to 445 yen after forecasting a loss of 3.3 billion yen ($41 million) for the year ending February 2013, citing an uncertain economic outlook. The company reported a 27.2 billion yen loss for the year ended in February 2012, according to a statement.

Pasco Corp., a survey company specializing in aerial photography, dropped 4.7 percent to 305 yen. The surveyor said there was a “high possibility” 799.3 million yen of software-related costs incurred in October were booked as assets.

The Nikkei 225 Volatility Index added 9.1 percent to 21.43, indicating traders expect a swing of about 6.1 percent on the benchmark gauge over the next 30 days. Trading volume was 26 percent below the 30-day average.

Shares on the Topix are valued at one times book value, compared with 2.2 times for the S&P 500 and 1.4 times for the Stoxx Europe 600 Index. A number below one means that investors can buy companies for less than the value of their assets.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at

To contact the editor responsible for this story: Nick Gentle at

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