Japanese Stocks Decline as Yuan Devaluation Weighs on Exporters

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Japan’s Topix index fell for the first time in 10 days after China devalued its currency by the most in two decades, raising concerns about Japan’s exports to its biggest trading partner.

Unicharm Corp, a diaper maker that gets 15 percent of sales in China, slumped 2.3 percent. Electronics retailer Laox Co., which relies on Chinese tourists for sales, dropped 3.2 percent. Kyushu Electric Power Co. sank 5.4 percent after becoming the first Japanese utility to restart a nuclear power plant since the Fukushima meltdown four years ago. Dai-ichi Life Insurance Co. added 1.2 percent after quarterly net income jumped 68 percent.

The Topix index slid 0.2 percent to close at 1,687.60 Tokyo, falling for the first day since July 28. The Nikkei 225 Stock Average lost 0.4 percent to 20,720.75, giving up gains of as much as 0.7 percent after China cut its currency’s reference rate. The move sent the yen surging 2.2 percent against the yuan in offshore trading, weighing on Japanese companies that rely on China for sales.

China has “basically subsidized the rest of the world by holding its currency high and not saying or doing too much about other currencies depreciating,” said Khiem Do, Hong Kong-based head of multi-asset strategy at Baring Asset Management Ltd. As China refocuses on its economy, “it’ll find that it’s totally justified about not giving its neighbors and trading partners a free ride,” including Japan.

Yuan Pledge

The People’s Bank of China cut its currency’s daily reference rate by 1.9 percent as policy makers stepped up efforts to support exporters and boost the role of market pricing in Asia’s largest economy. Tuesday’s move was a one-time adjustment, the central bank said in a statement, adding that it will strengthen the market’s role in the setting the rate.

The yen surged 2.2 percent to 19.61 per yuan in offshore trading after the announcement, the biggest single-day move since December. Japan counts China as its biggest market for exports with $163 billion sold there last year, according to figures from the International Monetary Fund.

Shares of Japanese firms that rely on China for sales slumped, including Unicharm and Laox, which each dropped at least 2.3 percent. Ryohin Keikaku Co., operator of the “Muji” brand that counts on China for a fifth of sales, fell 2.2 percent.

Nuclear Restart

Despite public opposition, Kyushu Electric restarted the country’s first nuclear reactor since the Fukushima meltdown four years ago, sending shares of the utility 5.4 percent lower. Other power companies also fell, including Kansai Electric Power Co., which dropped 4.7 percent.

Dai-ichi Life Insurance rose 1.2 percent to close at a record after quarterly net income jumped 68 percent to 115.2 billion yen, beating analyst estimates for 82.8 billion yen.

Futures on the Standard & Poor’s 500 Index slid 0.5 percent after the underlying measure jumped 1.3 percent on Monday in New York. Materials stocks climbed the most this year as copper rallied from a six-year low. The metal has lost 16 percent this year on prospects for rising global output and slower demand in China, the biggest user. The Stoxx Europe 600 Index added 0.7 percent.

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