Topix Falls From 4-Month High on Higher Yen, Overheating

Japanese stocks fell, with the Topix index dropping from the highest close in more than four months, as the yen maintained gains and technical indicators signaled to some investors the market is overbought.

Takata Corp. sank 2.1 percent, extending yesterday’s rout after saying its defective airbags may require further fixes. Tokyo Dome Corp., a baseball stadium operator, fell the most on the Nikkei 225 Stock Average after its quarterly profit plunged. Mitsubishi Heavy Industries Ltd. added 1.3 percent as the machinery maker and Siemens AG said they’re in talks about a joint bid to buy Alstom SA’s energy business and counter a $17 billion offer by General Electric Co.

The Topix lost 0.1 percent to 1,237.75 at the close in Tokyo after ending yesterday at the highest since Jan. 29. The 25-day Toraku Index, which compares the numbers of advancing and declining stocks on the Topix, reached 133 yesterday. A level above 120 indicates to some investors that shares have climbed too far, too fast. The Topix gained 13 of the previous 15 days.

“The Toraku gauge has gone up a lot as Japanese stocks played catch-up fast,” said Yusuke Kuwayama, a portfolio manager at Tokio Marine & Nichido Fire Insurance Co. in Tokyo. “The market was due a correction.”

The Nikkei 225 slid 0.6 percent to 14,973.53. The yen held at 102.05 per dollar after rising 0.5 percent the past two days.

While the Topix climbed 7.6 percent from its May 21 low, it’s still the worst performer this year among 24 developed markets tracked by Bloomberg. The measure capped a world-beating rally last year as the Bank of Japan pressed ahead with its record monetary easing. The central bank started a two-day policy meeting today.

BOJ Meeting

BOJ officials are considering maintaining a large balance sheet even after achieves its inflation target, reducing the risk of a surge in long-term bond yields, according to people familiar with the discussions.

Exporters slid as the yen maintained gains. Fanuc Corp., a maker of factory automation systems that gets 77 percent of its sales abroad, lost 2.2 percent to 17,325 yen. Komatsu Ltd., a maker of construction machinery that generates about 78 percent of its revenue overseas, slid 0.7 percent to 2,317 yen.

Takata fell 2.1 percent to 2,107 yen after slumping 4.1 percent yesterday. Toyota Motor Corp., the world’s largest automaker, expanded a 14-month-old recall of more than 2 million vehicles after Takata told clients further fixes may be needed for its airbags. The carmaker rose 0.1 percent to 5,880 yen today.

Tokyo Dome fell 3.1 percent to 493 yen. The stadium operator’s net income plunged 63 percent to 777 million yen ($7.6 million) in the three months ended April 30 from a year earlier.

Mitsubishi Heavy

Mitsubishi Heavy added 1.3 percent to 649 yen. The company and Munich-based Siemens will decide whether to submit a joint proposal to Alstom’s board of directors by June 16, the two companies said in a statement today, confirming an earlier report by Bloomberg News.

Futures on the Standard & Poor’s 500 Index rose less than 0.1 percent. The equity measure fell 0.4 percent yesterday as the World Bank cut its forecast for global economic growth and investors weighed equity valuations.

Analysts at JPMorgan & Chase Co. and Pierpont Securities LLC yesterday said the U.S. economy probably contracted more than estimated in the first quarter on a drop in health-care spending. The pullback means gross domestic product shrank at a 1.6 percent pace, JPMorgan said, steeper than the revised 1 percent contraction reported May 29.

The Topix traded at 1.2 times book value today, compared with 2.7 for the S&P 500 and 1.9 for the Stoxx Europe 600 Index yesterday.

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