Japanese Stocks Fall for a Second Day Before BOJ Meets, Earnings

  • Shippers, banks and metal producers lead declines in Topix
  • Investors take profit after four days of gains last week

Stocks in Tokyo fell for a second day, led by shippers, steelmakers and banks, as the yen gained and investors weighed earnings ahead of central bank meetings in the U.S. and Japan.

Bracing for Stimulus: What's Next for the BOJ?

The Topix index dropped 0.7 percent to 1,391.69 at the close in Tokyo, with seven shares retreating for every two that rose. The gauge added 3.4 percent last week, a second weekly gain. The Nikkei 225 Stock Average slipped 0.5 percent to 17,353.28. The yen strengthened 0.3 percent to 110.92 per dollar, rising for a second day. 

“Japanese stocks are at a level where investors can take profit,” said Toshihiko Matsuno, chief strategist at SMBC Friend Securities Co. in Tokyo. “It’s easier for investors to lighten their positions so damage will be limited in case something unexpected happens in U.S. and Japanese monetary policy.”

Traders expect no action from the Federal Reserve on Wednesday in Washington, while they see a 20 percent chance of a rate hike at the June meeting. Twenty-three of 41 analysts surveyed by Bloomberg expect the Bank of Japan will expand stimulus on April 28. Japan’s consumer prices and retail sales data for March will also be released Thursday in Tokyo.

Banks, Shippers

The Topix Banks Index was the biggest drag on the broader gauge, with Mitsubishi UFJ Financial Group Inc. falling 3.6 percent. Japan’s largest lender is likely to forecast a drop in profit for the current fiscal year, Kyodo news reported. Shippers, which led gains among the 33 Topix industry groups last week, fell the most on Tuesday.

Mitsubishi Motors Corp. plunged 9.6 percent after the Nikkei newspaper reported the company may have used fuel-efficiency tests inconsistent with government guidelines since the 1990s. The shares have dropped 50 percent over the past five sessions.

“We’re adjusting speed after rising so much last week,” said Tatsushi Maeno, head of Japanese equities at Pinebridge Investments Japan Co. in Tokyo. “Even if there’s action from the BOJ later this week, it probably won’t lift stocks drastically. Investors are selling now because of this.”

JSR Corp. sank 3.2 percent after the tiremaker’s forecast for operating profit missed analyst estimates. Hitachi Chemical Co. climbed 5.3 percent as the maker of products for chips and displays reported profit that beat its forecast. Japan Steel Works Ltd. was the biggest gainer on the Nikkei 225, surging 13 percent, following an investment rating upgrade by Morgan Stanley MUFG Securities Co.

Company Earnings

Some 27 companies on the Topix report earnings Tuesday, with more scheduled to announce later this week. Toshiba Corp. dropped 1.7 percent as it posted a wider-than-forecast operating loss after the troubled electronics conglomerate wrote down the value of its Westinghouse power unit. After the market close, camera maker Canon Inc. posted first-quarter results that missed estimates and cut its full-year forecast.

Japanese corporate profits are peaking as companies are unlikely to expand sales and margins due to a weak Chinese economy and a stronger yen, Toru Ibayashi, an analyst at UBS Group AG’s wealth management unit in Tokyo, wrote in a note. The BOJ’s adoption of negative interest rates will also hamper profits as companies’ pension liabilities increase, he wrote. Masahiro Suzuki, an analyst at Daiwa Securities Group Inc., says earnings, which probably posted double-digit growth last quarter, will fall by almost 10 percent in the three months ending June.

Futures on the Standard & Poor’s 500 Index were little changed after the underlying U.S. equity gauge slipped 0.2 percent on Monday, continuing a retreat from a four-month high. Energy producers in the benchmark, which have led a two-month rally, sank with oil prices.

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