Japan Stocks Fall as Topix Caps Worst Quarter Since September

  • Topix lags behind developed markets in global equity recovery
  • Banks were the biggest losers this quarter on negative rates

Axioma's D'Assier: Why Japan's Market Is Among Riskiest

Japanese stocks fell, dragged lower by a drop in telephone companies and retailers, as the benchmark Topix index capped its worst quarter since September.

The Topix sank 0.7 percent to 1,347.20 at the close in Tokyo to extend this quarter’s losses to 13 percent. The measure rose 3.8 percent in March. The Nikkei 225 Stock Average retreated 0.7 percent to 16,758.67. Global shares rose on Wednesday as the prospect U.S. borrowing costs will stay lower for longer underpinned a recovery in equities. The yen gained for a third day to trade at 112.29 per dollar on Thursday.

“We don’t know how long the yen will continue to strengthen, and there’s more concern now over company earnings forecasts for the new fiscal year,” said Kazuyuki Terao, chief investment officer at Allianz Global Investors Japan. “It’s not an easy situation to take risks in.”

Telecommunication stocks and retail trade companies were the biggest drags out of 33 industry groups on the Topix. Nippon Telegraph & Telephone Corp. and KDDI Corp. both slipped 2.3 percent. Aeon Co. tumbled 4 percent after Macquarie Group Ltd. cut its rating on the supermarket chain operator to underperform from neutral.

Sharp, Toshiba

Sharp Corp. lost 4.4 percent after Foxconn Technology Group agreed to buy the struggling Japanese electronics maker. Foxconn will pay 389 billion yen ($3.5 billion) for a controlling stake in Sharp, a drop of 100 billion yen from an agreement forged a month ago.

Toshiba Corp. rose 5.8 percent after saying it will sell an 80 percent stake in a lifestyle unit to China’s Midea Group Co. for 53.7 billion yen.

The MSCI All Country World Index gained 1.2 percent on Wednesday. Futures on the Standard & Poor’s 500 Index slipped 0.2 percent on Thursday. The underlying U.S. equity gauge rose 0.4 percent, closing at its highest level this year, after Fed Chair Janet Yellen voiced caution on raising interest rates given the risks to world growth.

“With the negative impact from a stronger yen and weaker dollar, Japanese shares can’t keep up with the global gains,” said Tatsushi Maeno, head of Japanese equities at Pinebridge Investments Japan Co. in Tokyo.

The Topix has climbed 13 percent since hitting a low on Feb. 12. The gauge started 2016 by tumbling into a bear market as global shares plunged, and has been lagging behind its peers amid the global recovery. The Japanese gauge is the second-worst performing developed market this year, and trades at about 14.5 times estimated earnings, compared with 17.5 times for the S&P 500 and 15.5 times for the Stoxx Europe 600 index.

Banks were the biggest losers this quarter among the Topix industry groups after lenders’ shares were hit by the Bank of Japan’s introduction of negative interest rates. Some so-called defensive stocks, such as food and telecommunication shares, fell less than the broader gauge.

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