Japanese shares fell, with the Nikkei 225 Stock Average halting a four-day rally, on concern U.S. lawmakers are making little progress on budget talks to avert the so-called fiscal cliff and after a technical indicator signaled the market may be overheating.
Mazda Motor Corp., an automaker that gets 28 percent of its sales in North America, dropped 2.3 percent. Alps Electric Co., a maker of electronic parts that gets about 74 percent of its revenue outside Japan, dropped 6.7 percent after the yen strengthened. Kawasaki Kisen Kaisha Ltd. led shipping lines lower after delaying expansion of its commodity-transport fleet.
The Nikkei 225 slid 1.2 percent to close at 9,308.35 in Tokyo after yesterday closing at the highest level since April. The broader Topix Index dropped 1.3 percent to 771.39, with more than four stocks declining for each that rose.
“There’s definitely signs of short-term overheating as stocks have risen fast over the past two weeks,” said Fumio Matsumoto, a fund manager who helps oversee about 65 billion yen ($795 million) in Japanese equities at T&D Asset Management Co. “I’m concerned about the fiscal cliff in the short-term.”
The Topix advanced 8.2 percent through yesterday from Nov. 14, when Prime Minister Yoshihiko Noda called for a Dec. 16 election, causing the yen to drop on speculation the opposition may win and call for more monetary easing.
Stocks fell after the 14-day relative strength index for the Topix reached 70.6 yesterday, climbing above the 70 threshold that some traders say signals a drop. The yen has rebounded against the dollar since reaching its seven-month low on Nov. 22.
‘Moving in Lockstep’
“A major driver behind the recent rally was that a weaker yen would boost exporter earnings, while the economic outlook got revised downward,” Matsumoto at T&D said. “As the yen stops falling, hopes for better earnings wane, too. The currency and stocks are moving in lockstep.”
The yen rose against all 16 of its major peers. The currency touched 81.77 per dollar, the strongest since Nov. 20 and 0.5 percent lower than yesterday’s close. A stronger yen cuts the overseas income at Japanese companies when repatriated.
Alps Electric fell 6.7 percent to 501 yen to lead declines on the Nikkei 225. Pioneer Corp., which gets 49 percent of its sales outside Japan, slid 5.9 percent to 191 yen.
The Topix 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. A number less than one means that companies can be bought for less than the value of their assets.
Futures on the S&P 500 declined 0.1 percent. The measure fell 0.5 percent yesterday, after Senator Majority Leader Harry Reid said “little progress” has been made in talks to avert the so-called fiscal cliff, a series of automatic spending cuts and tax increases that will occur unless a budget compromise is reached. The Organization for Economic Cooperation and Development said the situation increases global recession risk.
Exporters to the U.S. fell, with Mazda dropping 2.3 percent to 125 yen. Komatsu Ltd., a construction machinery maker that depends on the Americas for 23 percent of its sales, fell 2.1 percent to 1,805 yen.
Shipping lines fell the most among the Topix’s 33 industry groups after Kawasaki Kisen, Japan’s No. 3 shipper, said it will postpone an expansion of its commodity-vessel fleet as a global glut in transport capacity cuts cargo rates.
Kawasaki Kisen lost 4.6 percent to 103 yen. Nippon Yusen K.K., Japan’s leading shipping line, dropped 4.5 percent to 169 yen. Mitsui O.S.K. Lines Ltd. declined 4.9 percent to 196 yen.
The Nikkei Stock Average Volatility Index dropped 2.9 percent to 17.67, indicating traders expect a swing of about 5 percent on the benchmark gauge over the next 30 days.
Sakurada Co. plunged 92 percent to 1 yen, the biggest drop on the Topix, after the construction company announced bankruptcy proceedings.
Hulic Co. dropped 12 percent to 571 yen as the realtor plans to raise as much as 37 billion yen in a public share sale, according to a filing with the Finance Ministry showed.