Japan Shares Fall From Two-Month High as Yen Holds Gains

Japanese stocks fell, with the Topix index retreating from a two-month high, as exporters retreated after the yen rose yesterday and held gains today.

Canon Inc., a camera maker that gets 79 percent of sales overseas, slid 2 percent. Lixil Group Corp. sank 6.3 percent as the toilet maker was said to be in talks to buy Germany’s Grohe Group for more than 3 billion euros ($4 billion). Haseko Corp. lost 2.7 percent after the Yomiuri newspaper reported the Tokyo tax bureau found that the builder hid income.

The Topix dropped 0.3 percent to 1,214.87 at the close in Tokyo after finishing last week at its highest since July 24. The Nikkei 225 Stock Average lost 0.1 percent to 14,732.61. Japan’s currency gained 0.5 percent against the dollar yesterday when equity markets were closed for a holiday, before weakening less than 0.1 percent today.

“The yen has strengthened somewhat, weighing on shares,” said Osamu Koizumi, a Tokyo-based executive officer at Meiji Yasuda Asset Management Co., which oversees the equivalent of $17 billion in assets. “Japanese shares have rallied almost nonstop this month, and it will take something more, such as further stimulus, to extend gains from here.”

The Topix has climbed 9.8 percent in September after falling for four months and is up more than 7 percent this quarter. The gauge surged 41 percent for the year, making Japanese equities the best performers among developed markets as the Bank of Japan’s monetary easing weakened the yen, supporting exporters.

Sales Tax

Prime Minister Shinzo Abe will announce on Oct. 1 that he will raise the nation’s sales tax, the Asahi newspaper reported on Sept. 21 without citing anyone. Japan will provide more than 5 trillion yen ($51 billion) of additional stimulus beginning in the year starting April 2014 to counteract the increased levy, the newspaper reported.

Exporters fell after the yen gained yesterday. Canon dropped 2 percent to 3,155 yen. Sony Corp., an electronics maker that gets 68 percent of its sales abroad, lost 1.6 percent to 2,097 yen.

Futures on the Standard & Poor’s 500 Index were little changed today. The measure lost 0.5 percent yesterday, falling for a third day from a record high, as financial shares slumped and investors watched speeches from Federal Reserve officials for clues on monetary policy.

Data yesterday showed a Chinese manufacturing index rose to a six-month high in September, signaling that a rebound in the world’s second-largest economy is gaining steam. The preliminary reading of 51.2 for a Purchasing Managers’ Index released by HSBC Holdings Plc and Markit Economics compared with a 50.9 median estimate from economists surveyed by Bloomberg News.

‘Providing Floor’

“Japanese stocks are following the drop in U.S. shares,” said Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of about 5 trillion yen. “But losses are limited because the China PMI beat estimates during yesterday’s holiday. That’s providing a floor to the market.”

German Chancellor Angela Merkel was re-elected on Sept. 22, winning the highest share of votes since Helmut Kohl’s post-reunification victory in 1990.

Lixil Group slid 6.3 percent to 2,043 yen. Its subsidiary and Grohe may announce an agreement as early as this week, according to people with knowledge of the matter. Lixil said last month it’s considering overseas alliances and acquisitions to more than double sales to 1 trillion yen.

Haseko lost 2.7 percent to 143 yen after the Yomiuri newspaper reported the Tokyo tax bureau found that the builder hid a total 2.5 billion yen of income over three years through March 2012. Haseko has agreed to comply with the decision made by the bureau, spokesman Hidetake Ishinaga said by phone today.

iPhone Sales

Among stocks that rose, Murata Manufacturing Co., an electronic-components manufacturer that counts Apple Inc. as its biggest customer, gained 1.5 percent to 7,410 yen after the U.S. company sold a record 9 million iPhones in the weekend debut of two new models.

The handset were also available for the first time from NTT DoCoMo Inc., Japan’s largest wireless network. The stock added 0.9 percent to 163,200 yen. KDDI Corp., which also sells the iPhone, jumped 2.9 percent to 4,950 yen. SoftBank Corp., another distributor, added 1.1 percent to 6,630 yen.

The Topix traded at 1.27 times book value today, compared with 2.50 for the S&P 500 and 1.76 for the Stoxx Europe 600 Index yesterday. The Japanese measure’s 30-day historic volatility was at 19.73 today, compared with its five-year median of 19.42.

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