Japan’s Topix Falls as Investors Weigh U.S. Debt Impasse

Japanese shares fell, with the Topix index extending its longest losing streak since July 2012, as the yen climbed amid concern about the standoff over the U.S. debt limit and government shutdown.

Toyota Motor Corp., Asia’s biggest carmaker, slipped 1.5 percent as Japan’s currency added to last week’s gains against the dollar. TV maker Sharp Corp. and utility Tokyo Electric Power Co. led declines on the Nikkei 225 Stock Average, falling 8.2 percent and 7.6 percent, respectively. SoftBank Corp. gained 2.9 percent after data showed NTT DoCoMo Inc., Japan’s largest mobile phone carrier, lost subscribers last month even after it started selling Apple Inc.’s iPhone.

The Topix slid 1.4 percent to 1,147.58 at the close in Tokyo, with all but two of its 33 industry groups retreating. The measure lost 4.4 percent last week, the most since the period ended Aug. 9. The Nikkei 225 fell 1.2 percent today to 13,853.32. The yen added 0.4 percent to 97.10 per dollar.

“With so much uncertainty, it’s hard to actively invest in the stock market,” said Naoki Fujiwara, the Tokyo-based chief fund manager at Shinkin Asset Management Co., which oversees about $6 billion. “It’s not like the U.S. is going to default, so investors will probably continue buying on dips. But things could be volatile and we may see some big declines on some days, so the timing of when to buy back shares is difficult.”

The Topix declined seven straight days as a partial U.S. government shutdown began and concern grew about a possible default if the debt ceiling isn’t raised on time. The last time the measure recorded longer stretch of losses was in the nine trading days through July 18, 2012. The gauge was still up 33 percent this year, making Japanese equities the best performers among major developed markets.

Debt Ceiling

Futures on the Standard & Poor’s 500 Index sank 0.6 percent. The measure rose 0.7 percent in New York on Oct. 4, trimming its weekly decline to 0.1 percent.

The shuttering of government in the U.S. enters a second week, with an Oct. 17 deadline for raising the borrowing limit approaching. House of Representatives Speaker John Boehner said Republican lawmakers won’t increase the ceiling without packaging it with other measures.

While the Federal Reserve releases minutes of last month’s meeting this week, data from payrolls to retail sales will be delayed as long as the closure of government continues, making it more difficult to assess the state of the U.S. economy to decide on when to reduce stimulus.

Risk Aware

Toyota, which counts North America as its biggest market for sales, lost 1.5 percent to 6,090 yen. Sony Corp., Japan’s biggest television maker, declined 1.8 percent to 1,980 yen. Nintendo Co., a gaming console maker that gets almost 40 percent of sales from the Americas, dropped 1.7 percent to 10,800 yen.

“The market consensus is that the U.S. won’t end up defaulting,” said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd. “However, investors are aware of the risks and will keep refraining from buying.”

Sharp tumbled 8.2 percent to 291 yen. The company may set the price for as much as 166.4 billion yen ($1.7 billion) in new shares to be issued to the public as early as today, Sharp said last month. The shares have lost 20 percent over the past six days, with short interest rising to 41 million shares as of Sept. 27, the most in four months. Short interest is the total number of shares investors have sold short and have not bought back.

Tokyo Electric Power, also known as Tepco, sank 7.6 percent to 488 yen. The utilities claim that radioactive water leaking into the sea from the wrecked Fukushima nuclear plant is confined to the coast doesn’t make scientific sense, according to a U.S. researcher who surveyed waters off the site last month.

GPIF Allocations

Japan’s state-run Government Pension Investment Fund, the world’s biggest manager of retirement savings, plans to boost investment in growth stocks to increase returns and may eventually allocate several trillion yen to such equities, the Nikkei newspaper reported on Oct. 5, without saying where it got the information.

The 121 trillion yen fund will initially invest several billion yen in a new domestic index focused on returns on equity, governance and trading volume, Nikkei said.

Also over the weekend, the Financial Times reported that Prime Minister Shinzo Abe will not include labor reforms as part of his upcoming policies. Abe cited strong opposition within Japan to liberalization of employment rules, the newspaper reported, based on an interview.

Yoshinoya, Softbank

Yoshinoya Holdings Co., which operates fast-food chains, dropped 2.1 percent to 1,097 yen after cutting its forecasts on higher food and electricity costs.

Among stocks that rose, SoftBank gained 2.9 percent to 7,480 yen, the biggest single support to the Topix. NTT DoCoMo said that it lost a net 66,800 users in September, even after adding iPhones to its lineup in a bid to regain market share from SoftBank and KDDI Corp. SoftBank added 270,700 and KDDI 232,700 users, according to the carriers.

DoCoMo sank 1.2 percent to 1,542 yen, while KDDI was unchanged at 5,160 yen.

The Topix may yield 1.92 percent in dividends in the next 12 months, up from 1.7 percent in the past year, according to data compiled by Bloomberg. The measure traded at 1.20 times book value today, compared with multiples of 2.49 for the S&P 500 and 1.74 for the Stoxx Europe 600 Index on Oct. 4. The Japanese gauge’s 30-day historic volatility was at 18.19 today, compared with its five-year median of 19.34