Japan Shares Fall From Two-Month High as Shippers Drop

Japanese shares fell, with the Topix index dropping from a two-month high, as shipping lines and construction companies led losses amid the lowest trading volume this year. Shares pared declines as the yen weakened.

Kao Corp. tumbled 6.2 percent after the household-goods manufacturer’s cosmetics unit said 2,250 people reported white blotches on their skin after using brightening products. Shippers fell the most among the 33 Topix industry groups after trade data missed estimates. Hokkaido Electric Power Co. sank 4.6 percent as the nuclear regulator said it will delay safety checks on the utility’s reactors. Nidec Corp., the world’s No. 1 manufacturer of small precision motors, jumped 10 percent after raising its profit forecast.

The Topix decreased 0.2 percent to 1,219.92 at the close of trading in Tokyo, after falling as much as 0.7 percent. About eight shares dropped for every seven that rose. The Nikkei 225 Stock Average slipped 0.3 percent to 14,731.28.

“We’ve had some strong gains recently, and now we don’t have a strong reason for the market to trade higher, investors are wanting to take profits,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which oversees the equivalent of $4.8 billion. “But earnings are going to be good overall, so that should support the market.”

After plunging as much as 18 percent from a May 22 high, the Topix rebounded amid optimism Prime Minister Shinzo Abe will push through reforms after winning upper-house elections on July 21. Investor attention is now shifting to whether the government will cut corporate taxes, ease regulations, loosen labor laws, join the Trans-Pacific Partnership free-trade agreement and raise the sales tax as planned.

Earnings Season

Next week is the peak of first-quarter earnings reporting for companies on the Topix, with 688 of them scheduled to announce results. Earnings per share will more than double from the previous quarter, according to analyst estimates compiled by Bloomberg. Full-year profits are projected to rise 57 percent, the data show.

The yen weakened 0.4 percent against the dollar today, after strengthening for the past two days. The Japanese currency retreated against 14 of its 16 major peers.

Overseas visitors to Japan in the first half of this year rose 23 percent to a record 4.95 million, the Japan National Tourism Organization said today.

Exports increased 7.4 percent from a year earlier, the Finance Ministry said in Tokyo today, compared with the 10 percent median estimate of 26 economists surveyed by Bloomberg News. Imports climbed 11.8 percent, also missing estimates. The trade deficit was 180.8 billion yen ($1.8 billion), the narrowest in a year.}

Kao Tumbles

Shippers led declines among the Topix groups after the trade data, with Nippon Yusen K.K., Japan’s largest by value, dropping 1.3 percent to 296 yen. Mitsui O.S.K. Lines Ltd., the No. 2, slumped 1.9 percent to 413 yen, while Kawasaki Kisen Kaisha Ltd., the third biggest, fell 1.4 percent to 209 yen.

Among other shares that fell, Kao tumbled 6.2 percent to 3,230 yen, the biggest drop on the Nikkei 225. The company’s cosmetics unit Kanebo Cosmetic Inc. recalled up to 360,000 products that include the quasi-drug “Rhododenol” after 2,250 people reported the appearance of white blotches on their skin after use of brightening products.

Tokyo Electric Power Co., the most actively traded stock on the first section of the Tokyo exchange today, dropped for a sixth day to lead power producers lower. The utility known as Tepco, which is the second-best performing stock in developed markets this year, fell after saying radioactive groundwater was flowing into the ocean from its Fukushima nuclear plant.

Safety Checks

The stock also dropped after public broadcaster NHK said radiation decontamination efforts in Fukushima prefecture may cost 5.13 trillion yen, more than four times the budget the government has allocated, citing estimates by the National Institute of Advanced Industrial Science and Technology.

Hokkaido Electric Power Co. sank 4.6 percent to 1,422 yen, most since June 11, as Japan’s Nuclear Regulation Authority said it will postpone safety checks on two of three reactors the utility applied for July 8. The utility today said it will take comments made by the regulator into consideration and submit a revised application for the safety assessment.

Among stocks that rose, Nidec jumped 10 percent to 8,130 yen for its biggest gain in over four years. The Kyoto-based company raised its operating-profit forecast 7.1 percent to 75 billion yen after first-quarter profits exceeded estimates.

The Topix added 15 percent over the past five weeks, the biggest such advance since April 2009. The 25-day Toraku Index, which compares the numbers of advancing and declining stocks on the gauge, reached 132.79 today, above the 130 level some investors say signals stocks may decline.

‘Profit Taking’

“There’s a feeling that stocks are overheating, so after gains there’s going to be a lot of profit taking,” said Hiroichi Nishi, an equities manager in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s second-biggest lender by market value. “Still, with expectations for Abenomics and Japan’s economic recovery, we probably won’t see big declines. When stocks start looking cheap the buying momentum is likely to be quite strong.”

Just 2.1 billion shares were traded on the first section of the Tokyo exchange today, the lowest since Dec. 12, when 1.94 billion shares changed hands, Bloomberg data show. That’s a 73 percent fall from the May 23 peak of 7.66 billion shares, which was the highest since April 1989.

Futures on the Standard & Poor’s 500 Index rose 0.1 percent today. The measure lost 0.2 percent in New York yesterday as investors weighed corporate earnings amid speculation on when the Federal Reserve may cut asset purchases.

The Topix traded at 1.31 times book value today, compared with 2.49 for the S&P 500 and 1.69 for the Stoxx Europe 600 Index yesterday. The gauge’s 30-day historic volatility was at 25.57 today, down 41 percent from its July 2 high of 43.22.

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