Japanese Stocks Fall on Yen, Bets Fed to Cut Stimulus

Japanese stocks fell, with the Topix index closing at a one-month low, as the yen held yesterday’s gains and stronger U.S. economic growth fueled bets the Federal Reserve may cut stimulus sooner than expected.

Sony Corp., an electronics maker that gets 68 percent of sales abroad, lost 2.7 percent. Isetan Mitsukoshi Holdings Ltd. sank the most on the Nikkei 225 Stock Average after the department-store operator cut its net-income forecast. DeNA Co., an online-game company, tumbled 11 percent as profit fell below estimates. Consumer-lender Acom Co. slid 2.5 percent after disclosing it made loans to crime groups.

The Topix slipped 0.7 percent to 1,176.42 in Tokyo, its lowest close since Oct. 9, with all but six of the 33 industry groups dropping. The gauge fell 0.6 percent this week. The Nikkei 225 slid 1 percent today to 14,086.80. The yen traded at 98.11 per dollar after adding 0.6 percent yesterday. The U.S. reports jobs data today.

“Japanese stocks are getting hit after U.S. GDP data stoked speculation about stimulus tapering,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of $51 billion. “I expect the market to be nervous ahead of the payroll report, but I don’t think the drop will be that big. While tapering is negative for stocks, it also means the U.S. economy is good and can push down the yen.”

The Topix trailed 23 other developed markets tracked by Bloomberg in October, rising less than 0.1 percent, after Prime Minister Shinzo Abe decided to implement a sales-tax increase starting from April. The measure remains the best performer in the group this year as unprecedented monetary easing by the Bank of Japan weakened the yen, improving the earnings outlook for exporters.

U.S. Growth

Futures on the Standard & Poor’s 500 Index added 0.1 percent today. The equity measure slid 1.3 percent yesterday, the most since August. Data showed the economy expanded at a 2.8 percent annualized rate last quarter, exceeding the median economist estimate for 2 percent growth. The Fed has said it needs signs of a sustainable recovery before cutting stimulus.

Today’s monthly employment report may show payrolls rose by 120,000 workers in October after a 148,000 gain in September, while the jobless rate climbed to 7.3 percent, according to a Bloomberg survey of economists.

The European Central Bank yesterday unexpectedly cut its benchmark interest rate to a record low of 0.25 percent from 0.5 percent, after a drop in inflation to the slowest pace in four years threatened its mission to keep prices stable. The yen was at 131.38 per euro after surging 1.3 percent yesterday.

Earnings Season

“With Europe easing its monetary policy, expectations for a further drop in the yen have waned,” said Masaru Hamasaki, a senior strategist at Tokyo-based Sumitomo Mitsui Asset Management Co., which oversees about 11 trillion yen ($112 billion) in assets. “Domestically, there are a lack of catalysts and it’s hard to read how the sales tax announced on Oct. 1 will affect the market. I think a stalemate situation will continue for a while.”

Exporters retreated. Sony dropped 2.7 percent to 1,649 yen. Toyota Motor Corp., the world’s biggest carmaker, lost 1.1 percent to 6,200 yen, the biggest drag on the Topix.

More than 200 companies report earnings in Japan today. Profit per share on the gauge is expected to increase 45 percent from the previous quarter, according to analyst projections compiled by Bloomberg.

Isetan slumped 6.3 percent to 1,378 yen, its steepest fall since June 13. The group reported a 15 percent cut to its full-year net-income forecast to 20 billion yen, below the median estimate of 25.1 billion yen by analysts polled by Bloomberg.

DeNA Drops

DeNA Co. plunged 11 percent to 1,840 yen, the biggest decline since May. Second-quarter operating profit fell to 15.1 billion yen, falling short of the median analyst estimate of 16.5 billion yen. Nomura Holdings Inc. cut the Internet company’s equity rating to neutral.

Acom fell 2.5 percent to 348 yen after saying it found funding loans to organized crime groups in Japan. Mitsubishi UFJ Financial Group Inc., Acom’s largest shareholder, slid 1.3 percent to 608 yen.

The Topix traded at 1.21 times book value today, compared to 2.52 for the S&P 500 and 1.81 for the Stoxx Europe 600 Index yesterday.

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