Japanese Shares Drop Led by Exporters as Yen Strengthens

Japanese stocks fell, with the Topix Index extending the biggest weekly drop since August 2011, as the yen rose a third day after Bank of Japan Governor Haruhiko Kuroda said the country could withstand higher interest rates.

All but 15 companies fell on the Nikkei 225 Stock Average, with Toyota Motor Corp., Sony Corp. and Panasonic Corp. losing more than 4 percent. Softbank Corp. dropped 4.1 percent after U.S. Senator Charles Schumer said the carrier’s $20.1 billion bid for Sprint Nextel Corp. raises national security concerns. Nipro Corp. surged 19 percent after an initial public offering was announced for ReproCell Inc., a biotech company part-owned by the maker of medical products.

The Topix lost 3.4 percent to close at 1,154.07 in Tokyo, with 32 of 33 industry groups falling. The gauge, which plunged 6.9 percent on May 23, the most since the aftermath of the March 2011 disaster, is trading within half a percentage point from a correction, defined as a 10 percent drop from a recent high.

“The market is way ahead of fundamentals,” said Nader Naeimi, Sydney-based head of dynamic asset allocation at AMP Capital Investors Ltd., which manages $126 billion. “The market is going to be drifting lower -- from its high to its bottom, it’ll be a 20 percent fall over a few weeks. We may add on our positions then.”

The Nikkei 225 dropped 3.2 percent to 14,142.65 today on volume 15 percent above the 100-day average. The gauge’s volatility index, which cooled a second day from a two-year high, showed traders expect a swing of 11 percent for the benchmark in the next 30 days.

Shares Retreat

More than 750 of the 3,730 stocks listed in Japan have declined more than 25 percent from their one-year highs, according to data compiled by Bloomberg.The Topix is still up about 34 percent this year, more than double the advance for the Standard & Poor’s 500 Index, amid unprecedented monetary easing from the BOJ.

Carmakers and electronic companies exerted the biggest drag among Topix industry groups today. The yen rose as much as 0.5 percent to 100.79 per dollar after jumping 1.9 percent last week, the most since the five days ended June 1, 2012.

Toyota, the world’s biggest carmaker, lost 5 percent to 5,920 yen today, while Sony dropped 6.3 percent to 2,013 yen. Panasonic, which gets nearly half its sales from outside Japan, tumbled 7.1 percent to 831 yen.

SoftBank sank 4.1 percent to 5,170 yen. New York Senator Schumer wrote to the Treasury Department that SoftBank’s purchase of Sprint could open “a backdoor for hackers” targeting the U.S. because of a possible reliance on Chinese networking equipment.

China Growth

Shares also fell after China’s President Xi Jinping signaled a tolerance for slower expansion to avoid environmental degradation. A separate report showed gains in Chinese industrial companies’ profits quickened in April as sales increased.

There’s “no sign at this point of excessively bullish expectations in asset markets or in the activities of financial institutions,” BOJ Governor Kuroda said yesterday in Tokyo.

The central banker also cited an April report indicating an increase of between one to three percentage points in interest rates would be manageable, as improving lending margins and rising stocks offset some negative effects.

“The BOJ dominates asset markets for better or worse,” Bill Gross, co-chief investment officer at Pacific Investment Management Co., said yesterday in a post on Twitter. “Watch JGBs, the Yen and the exodus from each.”

Among stocks that gained, Nipro surged 19 percent to 1,330 yen, the most on the Topix. ReproCell, which is developing stem-cell drugs, said it would list on Osaka’s Jasdaq exchange for start-ups in June. Nipro is ReproCell’s second-biggest shareholder.

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