Japan Stocks Fall as Investors Weigh Stronger Yuan, Cheaper Oil

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Japanese stocks fell, capping the biggest weekly loss in a month, as oil’s tumble to a six-year low outweighed optimism that China’s sharp devaluations of its currency are over.

Commodity-related stocks led declines, with oil explorer Inpex Corp. sinking to the lowest in seven months. Kubota Corp. slumped for a second day to lead industrial shares lower after a government report yesterday showed orders for machinery fell to the lowest since May 2014. Nexon Co. surged by a record 19 percent after profit tripled at the gamemaker.

The Topix index fell 0.2 percent to 1,664.46 at the close in Tokyo, capping a weekly loss of 0.9 percent, the biggest decline since the second week of July. The gauge earlier gained as much as 0.3 percent after China raised the yuan reference rate following three days of devaluation that roiled global markets. The Nikkei 225 Stock Average fell 0.4 percent to 20,519.45. Oil headed for the longest run of weekly declines since January.

“It’s concerning that we can’t really see the bottom of oil prices,” said Hitoshi Asaoka, Tokyo-based senior strategist at Mizuho Trust & Banking Co. “It’s now a given that over-production won’t be dissolved any time soon.”

The yuan’s devaluation this week has driven down oil and industrial metals amid speculation the weaker Chinese currency will hurt demand by making dollar-denominated imports more expensive, and concern that the world’s second-largest economy is slowing more than expected. Iran’s nuclear deal with world powers last month also fueled speculation that it will pump more crude, adding to the glut.

Biggest Drop

Commodity-related shares declined the most among the Topix’s 33 industry groups. Inpex slumped 1.8 percent to the lowest since Jan. 19, while Nippon Steel & Sumitomo Metal Corp. dropped 2.2 percent.

Industrial companies retreated, with Kubota falling 3.8 percent, the most since April. A government report yesterday showed that machinery orders in June fell 7.9 percent from the previous month, the biggest decline since May 2014.

China’s surprise decision on Tuesday to start loosening its management of the yuan triggered a tumble in the currency, eliminating a point of stability for global markets and stoking concern over its impact on the timeline for U.S. monetary tightening. Reassurances from Chinese officials yesterday that they’ll curb excessive volatility helped stem losses in global stocks and the greenback.

Chinese Tourists

“It’s been a very tumultuous week,” said Stefan Worrall, director of equity cash sales at Credit Suisse Group AG in Tokyo. “One of the bigger themes in Japan this year has been inbound tourism,” and stocks that are sensitive to Chinese tourist spending “have had a very volatile week because of expectations they’ll be hurt by the action going on in China.”

Shares of duty-free electronics store Laox Co. extended gains after the People’s Bank of China set the yuan stronger. A stronger yuan increases the purchasing power of Chinese travelers. Shares of the retailer, which closed 6.9 percent higher, were also boosted by a report showing it doubled its profit outlook on a surge in tourist spending.

The yen weakened for the first time in four days in offshore trading against the yuan, falling 0.4 percent, to pare gains of 4 percent since Tuesday.

Nexon surged 19 percent after quarterly profit tripled on higher revenue from online games. Chief Executive Officer Owen Mahoney cited South Korea as the “largest region in the quarter” in an interview on Bloomberg Television Friday.

Abe Speech

Investors are awaiting Prime Minister Shinzo Abe’s speech to mark the 70th anniversary of Japan’s surrender in World War II. The content may determine the direction of political and economic relations with China and South Korea, Japan’s biggest trading partners in Asia. The event is scheduled for 6 p.m. Tokyo time.

Futures on the Standard & Poor’s 500 Index were little changed after the underlying measure lost 0.1 percent on Thursday in New York.

August options on the Nikkei 225 settled at 20,540.36, according to data compiled by Bloomberg. The settlement price, also known as the special quotation, is calculated after all stocks on the equity measure begin trading.

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