Topix Drops After Yesterday’s Surge as Yen Strengthens

Japanese stocks fell, after the Topix index soared the most in five months yesterday, as the yen gained. Tiremakers led losses with iron and steel makers.

Bridgestone Corp. fell 4.3 percent after Asia’s biggest tire producer forecast net income below analyst estimates. A Topix gauge tracking iron and steel companies sank 1.7 percent. Honda Motor Co., a carmaker that gets more than 80 percent of sales overseas, dropped 1.8 percent as the yen pared yesterday’s loss versus the dollar. Canon Inc., the world’s No. 1 camera maker, rose 2 percent after saying it will buy back as much as 1.6 percent of its shares.

The Topix sank 0.4 percent to 1,218.52 at the close in Tokyo after jumping 2.7 percent yesterday, the most since Sept. 3. More than two stocks fell for each that rose today. The Nikkei 225 Stock Average lost 0.5 percent to 14,766.53. The yen rose 0.1 percent versus the dollar after losing 0.4 percent yesterday.

“Japanese stocks had a knee-jerk rally yesterday, but the key is the yen,” said Goya Nakao, a senior investment manager at Sompo Japan Nipponkoa Asset Management Co. “The BOJ’s announcement doesn’t seem to be weakening the yen in a sustainable way. The currency is a bit stronger today and that’s causing stocks to fall.”

The BOJ yesterday doubled a funding tool to 7 trillion yen ($68 billion) and said individual banks could borrow twice as much low-interest money as previously under a second facility. It left unchanged a pledge to expand the monetary base by 60 trillion to 70 trillion yen per year.

Relative Performance

The Topix declined 6.4 percent this year. The index jumped 51 percent in 2013 as the BOJ’s unprecedented monetary easing weakened the yen and Prime Minister Shinzo Abe pursued his growth strategy.

Exporters fell as the yen gained. Honda lost 1.8 percent to 3,754 yen after rising 2 percent yesterday. Panasonic Corp., an electronics maker that gets about a half of its revenue overseas, lost 2.4 percent to 1,147 yen.

Bridgestone dropped 4.3 percent to 3,637 yen, the most since Feb. 4, after targeting a net income of 285 billion yen for 2014, compared with the 294.8 billion yen average of analyst estimates.

The Topix Iron & Steel index dropped 1.7 percent. Nakayama Steel Works Ltd. slid 3.4 percent to 85 yen and Kyoei Steel Ltd. declined 3.2 percent to 2,048 yen.

Share Buyback

Canon rose 2 percent to 3,140 yen after saying it will spend 50 billion yen on the share buyback. The company bought back similar amounts in September and three times in 2012.

Inpex Corp., Japan’s No. 1 energy explorer, advanced 3.9 percent to 1,314 yen. Increased profits and cash flow from the start of production at large-scale projects haven’t been factored in the share, Shigeki Matsumoto, an analyst at Nomura Holdings Inc., wrote in a report.

Futures on the Standard & Poor’s 500 Index slipped 0.1 percent. The equity measure climbed to within eight points of a record yesterday as a $25 billion deal to acquire Forest Laboratories Inc. offset slower growth in New York-area manufacturing.

The Federal Reserve will release minutes from its Jan. 28-29 meeting today, giving investors details on policy makers’ decision to trim bond purchases by $10 billion a second time.

Of the 290 companies on the Topix that reported quarterly earnings from the beginning of January and for which estimates were available, 65 percent beat analysts’ profit estimates, according to data compiled by Bloomberg.

The Topix traded at 1.20 times book value today, compared with 2.60 for the S&P 500 and 1.86 for the Stoxx Europe 600 Index as of yesterday.

Before it's here, it's on the Bloomberg Terminal.