Japan’s Topix Index Enters Correction After Yen Advances

Japanese stocks fell, with the Topix index extending its slump from a Sept. 25 peak to 11 percent, after the yen rose by the most since April and U.S. retail sales dropped more than forecast.

Mitsubishi UFJ Financial Group Inc., Japan’s No. 1 lender, dropped 3.2 percent, the second-biggest drag on the Topix. Japan Display Inc., a maker of mobile-device screens for Apple Inc., tumbled a record 18 percent to its lowest close after forecasting a loss. Recruit Holdings Co., the country’s biggest provider of short-term workers, climbed 7.4 percent on its trading debut after raising 197 billion yen ($1.9 billion) in Japan’s second-largest share sale this year.

The Topix declined 2.3 percent to close at 1,195.50 in Tokyo, with its loss of 11 percent since reaching a six-year high on Sept. 25 meeting the common definition of a correction. The Nikkei 225 Stock Average fell 2.2 percent to 14,738.38 today. A measure of volatility on the equity gauge surged 16 percent to the highest since March.

“The laundry list of woes remains in place,” said Andrew Wilkinson, Greenwich, Connecticut-based chief market analyst at Interactive Brokers LLC. There’s “a sense that the global economy is slowing and not growing.”

The Topix’s slide in the past three weeks wiped out gains for this year after a world-beating 51 percent surge in 2013. U.S. shares sank yesterday as a report showed a decline in retail sales, while Japanese equities have been buffeted by concern the government may raise the consumption tax to 10 percent from 8 percent in April and that Chinese economic growth may slow faster than some anticipated.

Retail Sales

Retail sales in the U.S. dropped more than forecast in September, reflecting a broad-based pullback that signaled consumers took a breather. Another report showed manufacturing in the Fed Bank of New York’s region slowed more than projected in October. The bank’s so-called Empire State index dropped to 6.2 from an almost five-year high of 27.5 in September. Readings greater than zero signal growth.

The number of people potentially exposed to Ebola in the U.S. is growing after a second Texas health worker who tested positive for the virus flew from Dallas to Cleveland and back before reporting she had symptoms of the deadly disease.

“The market is reacting vividly to any numbers that show the economy is worsening,” said Mitsushige Akino, executive officer at Ichiyoshi Asset Management Co. in Tokyo. The U.S. retail sales number “isn’t much to worry about yet, but the reaction is due to expectations that there’ll be further falls with more Ebola infections.”

The yen slid 0.3 percent to 106.24 per dollar today after surging 1.1 percent yesterday.

U.S. Futures

Futures on the Standard & Poor’s 500 Index gained 0.2 percent today. The underlying gauge yesterday bounced in the afternoon after losses snowballed to 3 percent, closing down 0.8 percent at the lowest level since April. Almost 12 billion shares changed hands in the U.S., the most since October 2011.

The Chicago Board Options Exchange Volatility Index, the benchmark gauge of options prices known as the VIX, jumped 15 to 26.25, the highest level since 2012, amid demand for protection against losses in equities.

Federal Reserve Chair Janet Yellen voiced confidence in the durability of the U.S. economic expansion in the face of slowing global growth at a closed-door meeting last weekend, according to two people familiar with her comments.

Banks, Exporters

Banks and exporters were among the largest drags on the Topix index today. Mitsubishi UFJ Financial dropped 3.2 percent to 560 yen and Sumitomo Mitsui Financial Group Inc. declined 2.7 percent to 3,933.5 yen. Toyota Motor Corp., which gets 75 percent of its car sales abroad, sank 1.9 percent to 5,879 yen, the biggest drag on the Topix, and Nissan Motor Co. slipped 1.4 percent to 953.2 yen.

Japan Display tumbled 18 percent to 359 yen. The firm said it expects a loss of 10 billion yen ($94 million) in the year ending March, compared with a previous forecast for net income of 26.8 billion yen, according to a statement yesterday.

Among shares that rose, Recruit surged 7.4 percent to 3,330 yen on its debut. Its successful initial public offering follows a string of lackluster debuts in Japan, which saw companies fall an average of 10 percent from their offer prices when adjusted for deal size, data compiled by Bloomberg show.

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