Japan Stocks Fall as Investors Watch Greece, Await Fed Meeting

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Japanese stocks fell, with banks and exporters dragging the Topix index lower, as investors await an update from the Federal Reserve on U.S. monetary policy and a meeting of euro-area finance ministers with Greece.

Sumitomo Mitsui Financial Group Inc. slumped 3.2 percent to provide the biggest drag to the Topix. Mitsui Mining & Smelting Co. lost 1.7 percent after Mizuho Financial Group Inc. cut its rating on the stock. Game-maker Square Enix Holdings Co. jumped 2.9 percent after previewing its Final Fantasy title at a conference in Los Angeles.

The Topix lost 0.7 percent to 1,639.86 at the close of trading in Tokyo, with about three shares dropping for each that rose. Volume was about 14 percent below the 30-day average. The Nikkei 225 Stock Average slipped 0.6 percent to 20,257.94.

“The mood to step back and see what happens with the Fed meetings and the Greece negotiations won’t be any different today,” Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co. in Tokyo, said by phone. “As the time limit nears for Greece, negotiations aren’t reaching a conclusion. Investors can’t go long on Japanese stocks with abandon.”

The Federal Reserve begins a two-day meeting Tuesday, at which officials are expected to leave interest rates unchanged. Improving economic reports since the central bank’s last session have pushed the probability for a September increase to 53 percent, data compiled by Bloomberg show. Japan policy makers are also reviewing borrowing costs this week.

Kuroda Yen

Japanese shares held losses even as the yen weakened against the dollar following comments on the currency from Bank of Japan Governor Haruhiko Kuroda in parliament on Tuesday.

Kuroda told parliament that he wasn’t trying to influence the exchange rate in remarks last week that sent the yen climbing against the greenback. Kuroda last week said the yen was “unlikely to weaken further in real effective terms.”

“There’s a lot of focus on Kuroda’s comments today, given what happened last week,” said Naoki Fujiwara, Tokyo-based chief fund manager at Shinkin Asset Management Co. “The currency is the main focus in relation to the BOJ right now. But there’s more concern over the FOMC and an agreement within the euro region over Greece.” The yen fell 0.2 percent to 123.62 per dollar.

E-mini futures on the Standard & Poor’s 500 Index lost 0.2 percent. The underlying gauge dropped 0.5 percent in New York on Monday as investors weighed weaker-than-forecast U.S. manufacturing data and the Greek debt crisis.

Output Drops

Factory production unexpectedly declined in May as the slump in energy output deepened. The sluggish data signal that a stronger dollar and decrease in fuel prices are still holding back American factories. An earlier report showed manufacturing activity in the New York region unexpectedly worsened this month amid a drop in new orders.

Finance Ministry officials from the 19-nation euro zone are due to hold a Greece call on Tuesday ahead of a meeting of ministers later this week.

The latest round of bailout talks between Greece and its creditors ended in acrimony after leaders met for just 45 minutes in Brussels on Sunday. European policy makers raised pressure on Greece to return to the negotiating table and make further concessions to unlock aid, as each side laid out its demands to rally support for its respective position.

“All week it will be about Greece and the Fed,” Stan Shamu, Melbourne-based market strategist at IG Ltd., said by phone. “We might start to see the Fed getting a little bit more upbeat and that could cause some volatility. Most traders want to be cautious first and react after we see what happens toward the back end of the week with Greece.”

Banks Slump

The Topix Banks Index slumped 2.3 percent, the biggest drag among the 33 industry groups on the broader gauge. Sumitomo Mitsui lost 3.2 percent, its biggest drop since May 2014. Mitsubishi UFJ Financial Group Inc., the country’s largest lender, declined 1.6 percent.

The Topix Electric Appliances Index declined 0.9 percent, with Fanuc Corp. slipping 1.8 percent and Sony Corp. losing 1.4 percent.

Mitsui Mining & Smelting sank 1.7 percent after Mizuho cut its rating on the stock to neutral from buy.

Square Enix added 2.9 percent, climbing to its highest close since 2008. Shares gained after the creator of the Final Fantasy franchise announced a new installment of the game for Sony Corp.’s PlayStation 4.

(An earlier version of this story was corrected to show stocks fell in the first paragraph.)

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