Japan Stocks Start New Quarter With Biggest Loss in Seven Weeks

  • Tankan index of confidence among manufacturers at 3-year low
  • Panasonic slumps after forecasting profit will fall 8.5%

Japanese stocks began the new fiscal year with the biggest loss in seven weeks, as business sentiment deteriorated to near a three-year low and a weak forecast from Panasonic Corp. sparked concern over corporate profits.

The Topix dropped 3.4 percent to 1,301.40 at the close in Tokyo, sinking for a fourth day to the lowest level in a month. The measure fell 4.7 percent this week after capping a 13 percent quarterly drop. The Nikkei 225 Stock Average slumped 3.6 percent to 16,164.16 Friday after the Tankan index of confidence among large manufacturers missed economist estimates. A measure of volatility on the Nikkei 225 jumped 19 percent, the most since Feb. 9. The yen added 0.3 percent to 112.23 per dollar.

“The situation is getting harsher,” said Hiroaki Hiwada, a Tokyo-based strategist at Toyo Securities Co. “With the yen strengthening, we can’t envision earnings increasing.”

Tankan Tanks

The Tankan index fell to a reading of 6 in the first quarter, the lowest level since mid-2013, from 12 in the previous three months, the Bank of Japan reported Friday. Economists had expected a reading of 8. A positive number means there are more optimists than pessimists among manufacturers. Big companies across all industries plan to cut capital expenditure by 0.9 percent this fiscal year, more than the median economist estimate of 0.7 percent.

Large manufacturers based their plans on an assumption that the yen will average 117.46 per dollar over the next 12 months, a level more than 5 yen weaker than its rate Friday.

“The data has worsened overall, regardless of industry sector and company size,” Koya Miyamae, an economist at SMBC Nikko Securities in Tokyo, wrote in a note. “There’s
especially an indeterminate sense of concern for the outlook." 

Strategists are turning cautious after the best month for the Topix since October helped pare the first quarter’s losses. The Japanese benchmark started 2016 by tumbling into a bear market as global shares plunged, and has been lagging its peers amid the global recovery. The Japanese gauge is the second-worst performing developed market this year, as the yen has weighed on exporters’ earnings prospects.

Panasonic Slumps

Precision appliance manufacturers and automakers were among the biggest drags on the Topix on Friday. Panasonic plunged 12 percent, its biggest decline in more than three years, after forecasting an 8.5 percent drop in profit as it boosts spending on new products outside of its consumer electronics business. 

Milbon Co. retreated 4.8 percent after the hair-care products maker said its first-quarter operating profit fell 7.3 percent against a year earlier. Toyota Boshoku Corp. rose 5.3 percent after Goldman Sachs Group Inc. raised the auto-parts maker’s rating to buy from neutral.

Foreign investors were net sellers of Japanese stocks for a 12th straight week in the period ended March 25, according to data released Thursday by Japan Exchange Group Inc. Prime Minister Shinzo Abe said Tuesday that the best way to boost Japan’s economy is to quickly implement the existing budget for the next fiscal year, rejecting speculation he would announce a supplementary spending package.

“Investors appear to be more wary of risk," said Yoshihiro Okumura, a general manager at Chiba-Gin Asset Management Co. in Tokyo. “The Japanese government is probably considering a package of supportive policies, but until that becomes more evident, there’s a lack of reasons to buy.”

Futures on the Standard & Poor’s 500 Index slipped 0.3 percent. The underlying U.S. equity gauge fell 0.2 percent on Thursday as the March rebound that had global equities on the brink of erasing losses for 2016 faltered. The U.S. releases its March payrolls report on Friday.

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