Japan Stocks Fall as Investors Take Profits After 12-Day Rally

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Japanese stocks fell for the first time in in 13 days as concerns the U.S. is inching closer to raising interest rates prompted investors to take profit on the Topix index’s longest rally since 2009.

Banks and rubber product-makers, two of the largest beneficiaries during the rally, were among the biggest decliners today. Bridgestone Corp. slumped 3.3 percent, while Mitsubishi UFJ Financial Group Inc. was the heaviest drag on the Topix index, dropping 2.3 percent. Japan Tobacco Inc. fell 1.8 percent after its Canadian subsidiary was ordered to pay C$2 billion ($1.6 billion) in lawsuits. NTT Docomo Inc. jumped 3.9 percent after the Nikkei newspaper reported the mobile carrier plans to boost shareholder returns through buybacks and cost reductions.

The Topix index lost 0.3 percent to 1,674.21 at the close in Tokyo after rallying 5.5 percent in the 12 days through yesterday. The Nikkei 225 Stock Average lost 0.1 percent to 20,543.19. The yen traded at 124.64 per dollar after weakening 0.5 percent yesterday as U.S. manufacturing data indicated renewed strength in the world’s largest economy.

“After so many continuous days of gains, certain parts seems stretched,” said Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co. in Tokyo. “The ISM figures offer support to Federal Reserve Chair Yellen’s desire to hike rates.”

The Institute for Supply Management’s U.S. factory index rose to 52.8 in May from an almost two-year low 51.5 in April, government figures Monday showed. A separate report revealed construction outlays gained in April by the most since May 2012, while another showed little change in personal spending.

The greenback and Treasury yields advanced after the data, with investors awaiting additional economic reports this week, including the trade balance and payrolls. The Fed is weighing the data as it determines when to raise benchmark interest rates for the first time since 2006.

Profit Taking

Makers of rubber goods were the second-biggest decliners among the Topix’s 33 industry groups, with tiremaker Bridgestone falling 3.3 percent while Yokohama Rubber Co. lost 1.1 percent. The group gained 11 percent over the past 12 days.

A measure of banks, which gained 11 percent in that span, was the third worst-performing group today, dropping 2.3 percent. Mitsubishi UFJ fell 2.3 percent and Sumitomo Financial Group Inc. lost 2.6 percent.

Japan Tobacco retreated 1.8 percent after its Toronto-based subsidiary JTI-MacDonald Corp. was ordered to pay C$2 billion to plaintiffs in two class-action lawsuits related to addiction and smoking-related diseases. The subsidiary said it would appeal the ruling.

NTT Docomo jumped 3.9 percent after the Nikkei reported the company will target return-on-equity rates of more than 10 percent by repurchasing shares and reducing costs. The mobile carrier also got a boost after Credit Suisse Group AG lifted its rating on the stock to neutral from underperform.

Rising Wages

A report on Tuesday showed Japanese wages increased faster than the cost of living in April for the first time in two years as the impact of last year’s sales-tax hike faded. Real pay rose 0.1 percent from a year earlier, the labor ministry said on Tuesday. Overall wages, including overtime and bonuses, climbed 0.9 percent, the most since December, as base pay advanced for a second straight month.

“As wages rise, the ability for companies to pass through costs will increase, which will support earnings,” said Nobuyuki Kashihara, who helps oversee $26 billion at Mizuho Asset Management Co. in Tokyo. “This is a positive loop.”

E-mini futures on the Standard & Poor’s 500 Index rose 0.1 percent after the underlying measure climbed 0.2 percent on Monday in New York.

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