Japan Stocks Fall on BOJ Decision, Exports, Ratings Cut

Japanese stocks fell, sending the Nikkei 225 Stock Average to its first drop in three days, after the Bank of Japan refrained from adding more monetary stimulus, and as concerns mounted that Greece may exit the euro zone.

Canon Inc., a camera maker that gets 80 percent of its revenue overseas, lost 2.6 percent after exports rose less than estimated and Fitch Ratings cut Japan’s foreign-currency rating. Mizuho Financial Group Inc., Japan’s No. 3 publicly traded lender, fell 2.6 percent after Fitch put Japanese banks on watch for possible downgrade. Renesas Electronics Corp. plunged 9 percent as a report prompted speculation the chipmaker may struggle to return to profit.

“Uncertainty on the Greek issue is increasing, weighing on the markets” said Kiyoshi Ishigane, a Tokyo-based strategist at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $70 billion. Stocks extended drops as “the yen strengthened, rather than on the BOJ decision itself,” he said.

The Nikkei 225 lost 2 percent to 8,556.60 at the 3 p.m. close in Tokyo, with volume 13 percent above the 30-day average. The broader Topix slid 1.6 percent to 721.57, with almost six shares dropping for each that gained.

Stocks extended declines as the yen advanced after the Bank of Japan left its asset-purchase and credit-loan programs unchanged, as anticipated by all 14 economists surveyed by Bloomberg News. The policy board kept the key overnight lending rate between zero and 0.1 percent.

“The BOJ decision isn’t a big disappointment,” Mitsubishi UFJ Asset’s Ishigane said. “I don’t think many people expected any action this time.”

Yen Gains

The yen appreciated to as high as 79.52 against the dollar in Tokyo after the BOJ announcement, compared with 80.01 when stock trading opened today. Against the euro, Japan’s currency strengthened to 100.74 from 101.30. A stronger yen reduces the value of overseas income at Japanese companies when repatriated.

Canon sank 2.6 percent to 3,230 yen. Kyocera Corp., an electronic components maker that derives more than half of its sales outside Japan, lost 2.9 percent to 6,760 yen.

The Standard & Poor’s 500 Index declined 0.4 percent today. The index added 0.1 percent in New York yesterday, erasing earlier gains after Dow Jones reported that former Greek Prime Minister Lucas Papademos said while it is unlikely the nation will leave the euro, it’s still a risk. European Union leaders will meet in Brussels today to discuss how to revive growth.

Exports Miss

Japanese shares also fell after Japan’s exports rose a less-than-estimated 7.9 percent in April from a year earlier, underscoring the risk that weakness in global demand may limit the rebound in the world’s third-biggest economy.

Fitch cut Japan’s foreign-currency rating by two levels to A+ yesterday with a negative outlook. The nation’s fiscal consolidation plan looks “leisurely,” Andrew Colquhoun, head of Asia-Pacific sovereigns at Fitch, said in a statement.

Japan’s widening trade deficit and Fitch’s rating cut are “not big deals, but are negative,” said Masaru Hamasaki, chief strategist at Toyota Asset Management Co., which oversees the equivalent of $23 billion. “Some investors may be selling on minor negative news because they are waiting for a trigger for stocks to rebound.”

Mizuho lost 2.6 percent to 114 yen and Sumitomo Mitsui Financial Group Inc. slid 1 percent to 2,310 yen after Fitch put the banking entities under the lenders on negative watch.

Renesas Plunges

Renesas Electronics, the world’s biggest maker of automotive microcontrollers, plunged 9 percent to 263 yen after the Nikkei newspaper reported, without saying where it got the information, that the company expects to announce plans by July to cut jobs and consolidate plants after posting a loss last fiscal year on slumping sales of its system chips used in digital appliances.

The Topix has plunged 17 percent from this year’s high on March 27 as China’s economic growth slowed and on renewed concern about Europe’s debt crisis. The political gridlock in Greece after an inconclusive election this month reignited concern the nation will renege on austerity pledges required for 240 billion euros ($304 billion) in aid and exit the euro.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE