Bloomberg News

Japan Stocks Drop Most in Two Months Ahead of No-Confidence Vote

June 02, 2011

June 2 (Bloomberg) -- Japan’s stocks fell the most since April after U.S.?manufacturing growth slowed and as investors awaited the results of a no-confidence vote in Prime Minister Naoto Kan.

Toyota Motor Corp. and Honda Motor Co., the automakers hardest hit by the March’s earthquake disaster, lost at least 2.4 percent after leading a drop in U.S. car sales last month. Fanuc Corp., Japan’s biggest maker of industrial robots, sank 2.6 percent. Kan survived the vote minutes after markets closed by appeasing dissidents in his own party with an offer to resign once Japan emerges from its worst crisis since World War II.

The Nikkei 225 Stock Average dropped 1.7 percent to 9,555.04 at the 3 p.m. close in Tokyo, the steepest decline since April 12, after a gauge of U.S. manufacturing fell to its lowest level in more than year, signaling the global recovery may be slowing. A separate report showed American companies hired workers last month at the slowest pace since September.

“The recovery has hit a soft patch,” said Kiyoshi Ishigane, a senior strategist in Tokyo at Mitsubishi UFJ?Asset Management Co., which oversees the equivalent of $84 billion. “In the aftermath of the quake, a shakeup in government is definitely not a good thing, but the administration has lost credibility.”

March 11

The Topix lost 1.6 percent to 825.76. The index has tumbled 11 percent since the magnitude-9 earthquake and tsunami on March 11 that left almost 24,000 people dead or missing, disabled a nuclear power plant and disrupting supply chains at companies from Toyota to Canon Inc.

The Diet’s lower house rejected the no-confidence motion against Kan 293-152, as opposition lawmakers failed to attract enough support from ruling Democratic Party of Japan. Former DPJ premier Yukio Hatoyama called for party unity in rejecting the bill after Kan said he would step down once the disaster is contained.

Speaking in a nationally televised meeting of DPJ lawmakers ahead of the vote, Kan said he would “like to pass on my responsibility to a younger generation once we reach a certain stage in tackling the disaster and I’ve fulfilled my role.”

Carmakers were the biggest drag on the Topix. Toyota lost 3.6 percent to 3,270 yen, while Honda dropped 2.4 percent to 3,045 yen. The two companies led a drop in U.S. car sales last month as part shortages stemming from the quake crimped supply of some models. Sales fell 33 percent for Toyota and 23 percent for Honda.

Fanuc, Kyocera

Maker of electronics also declined. Fanuc sank 2.6 percent to 12,340 yen. Kyocera Corp., a Japanese electronics maker that gets more than half of its sales abroad, fell 1.8 percent to 8,350 yen.

The yen gained against its most-traded counterparts as weak data from the U.S. increased concern the global recovery is slowing, boosting demand for haven assets.

The currency appreciated to as high as 80.68 against the dollar last night in Tokyo, compared with 81.30 at the close of stock trading yesterday. Against the euro, the yen strengthened to 115.77 from 117.39. A stronger home currency cuts the value of overseas earnings for Japan’s exporters.

Oil-related companies plunged the most among the Topix’s 33 industry groups after crude prices declined 2.4 percent in New York yesterday, the biggest drop since May 11. Inpex Corp., the nation’s largest oil explorer, retreated 2.9 percent to 575,000 yen and its closest rival Japan Petroleum Exploration Co. slumped 3.1 percent to 3,815 yen.

-- With assistance from Satoshi Kawano in Tokyo. Editors: Jason Clenfield, Nick Gentle.

To contact the reporter on this story: Norie Kuboyama in Tokyo at nkuboyama@bloomberg.net.

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net.


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