Japan Stocks Fall as GDP Shrinks Most Since Earthquake

Japanese shares declined, with the Nikkei 225 Stock Average capping its longest losing streak in four months, after the gross domestic product contracted in the third quarter by the most since last year’s earthquake.

Sony Corp., Japan’s biggest consumer-electronics exporter, fell 2.6 percent after being cut to the lowest investment grade at Moody’s Investors Service. Canon Inc., a camera maker that gets almost a third of its sales in Europe, slid 1.3 percent before the region’s finance ministers meet to discuss Greece’s bailout. Yokohama Rubber Co. led tiremakers lower after posting quarterly earnings that missed analysts’ estimates and as rubber prices fell to a two-month low.

The Nikkei 225 fell 0.9 percent to 8,676.44 at the 3 p.m. close in Tokyo, declining for a sixth day. Volume on the gauge was about 30 percent below the 30-day average. The broader Topix Index lost 1.1 percent to 722.58, with more than four shares dropping for each that gained.

“As Japan’s GDP shows, the economy earlier had relatively positive growth but it’s running out of breath,” said Goya Nakao, a senior investment manager at Sompo Japan Nipponkoa Asset Management Co., which oversees about 5 trillion yen ($63 billion). “Manufacturers relying on overseas demand are stagnating. They’re being propped up by domestic support but this can’t sustain them.”

The Topix has risen 0.5 percent since Sept. 6 after the European Central Bank started a global wave of stimulus to boost growth, with the U.S. Federal Reserve and the Bank of Japan following suit. Shares on the equity gauge traded at 0.9 times book value, compared with 2.1 for the Standard & Poor’s 500 Index and 1.5 for the Europe Stoxx 600 Index.

GDP Shrinks

Japan’s economy shrank an annualized 3.5 percent in the three months through September as exports tumbled and consumer spending slumped, the Cabinet Office said today in Tokyo. Economists had estimated a 3.4 percent contraction. GDP will probably shrink 0.4 percent this quarter, according to economists surveyed by Bloomberg News. That would be the third technical recession since 2008.

Futures on the S&P 500 rose 0.2 percent today. The gauge added 0.2 percent on Nov. 9 after data showed consumer confidence climbed to a five-year high, outweighing concern about a looming budget showdown.

European finance ministers from the 17-member currency union will meet today in Brussels following an agreement by Greek lawmakers to make cuts in pensions and benefits. While the ministers are unlikely to finalize an updated aid package for Greece, a European official said Nov. 9 that they’ll find a way to overcome a gap in the country’s financing this week.

“Investors are moving to a risk-off stance because they’re cautious about the situation in Europe,” Sompo Japan Nipponkoa Asset’s Nakao said.

Euro Weakens

Exporters to Europe fell after the euro depreciated to as low as 100.93 yen today in Tokyo, compared with 101.62 at the close of stock trading Nov. 9. A stronger yen cuts the value of overseas income at Japanese companies when repatriated.

Canon lost 1.3 percent to 2,453 yen. Nintendo Co., a video-game console maker that gets a third of its revenue from Europe, sank 3.3 percent to 9,500 yen.

China central bank Governor Zhou Xiaochuan yesterday highlighted the effects of what he termed five years of crisis, adding to officials’ cautions on the economic outlook even after export growth rebounded in October. The nation’s trade surplus swelled to $32 billion, the highest in almost four years, data showed on Nov. 10.

Sony slipped 2.6 percent to 856 yen after its credit rating was cut one level to Baa3 from Baa2 at Moody’s, which cited falling demand for its televisions and cameras. The ratings company also assigned the exporter a negative outlook.

Tiremakers declined the most among the Topix’s 33 industry groups after rubber for delivery in April lost as much as 1.9 percent on the Tokyo Commodity Exchange today, the lowest level since Sept. 14.

Yokohama Rubber

Yokohama Rubber plunged 6.3 percent to 518 yen, the biggest decline on the Nikkei 225, after reporting third-quarter operating profit of 6.4 billion yen, less than the 10.1 billion-yen analyst estimate. Citigroup Inc. called the results “weak,” saying profit was hurt by falling orders and higher production costs. Sumitomo Rubber Industries Ltd. sank 3.5 percent to 838 yen.

Among stocks that rose, Suzuki Motor Corp. climbed 4.5 percent to 1,835 yen after first-half net income rose 31 percent to 41.9 billion yen, beating its forecast for a 20 percent gain on growing domestic auto sales. The company gained the most on the Nikkei 225, followed by Bank of Yokohama Ltd.

Bank of Yokohama jumped 4.4 percent to 378 yen after saying it will spend as much as 10 billion yen to buy back up to 2.22 percent of its outstanding shares. The lender also raised its net-income forecast 1.8 percent to 56 billion yen for the year ending March 31, reflecting a change in accounting methods for fixed-asset depreciation.

The Nikkei Stock Average Volatility Index sank 6.9 percent to 17.96, indicating that traders expect a swing of 5.1 percent on the equity benchmark in the next 30 days.

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