Bloomberg News

Japan Stocks Fall After Fed Cuts Growth Forecast; Kyocera Drops

June 23, 2011

June 23 (Bloomberg) -- Japanese stocks declined for the first time in four days after the U.S. Federal Reserve cut its forecast for growth in the world’s biggest economy.

Kyocera Corp., a maker of solar panels which gets more than 20 percent of its sales in the U.S., declined 1.7 percent. Nippon Electric Glass Co., which makes glass for liquid-crystal displays, fell for a second day after Macquarie Group Ltd. cut its rating to “underperform.” Isuzu Motors Ltd. and Suzuki Motor Corp., automakers that had delayed earnings forecasts because of damage from March’s earthquake, climbed after saying profit will rise this year.

“Stocks have almost priced in the U.S. economic soft patch, but it should take a while to identify whether the economy will worsen,” said Mitsushige Akino, who oversees about $600 million in Tokyo at Ichiyoshi Investment Management Co.

The Nikkei 225 Stock Average fell 0.3 percent to 9,596.74 at the 3 p.m. close in Tokyo. The broader Topix index declined 0.4 percent to 825.51, with five stocks retreating for every three that rose.

The Topix has lost 11 percent since March 10, the day before a magnitude-9 earthquake and tsunami devastated Japan’s northeast coast, triggering the worst nuclear accident in 25 years, damaging factories, and leaving more than 23,000 people dead or missing.

Valuations Drop

The slump pushed valuations on the Topix to 1.2 times book value, compared with 2.17 on the Standard & Poor’s 500 Index and 1.55 on the Stoxx Europe 600 Index. About two thirds of the 1,671 Topix companies trade at less than book value, meaning investors could theoretically buy the firms at current prices and liquidate them at a profit.

Kyocera dropped 1.7 percent to 8,140 yen. Nikon Corp., a camera maker that counts North America as its biggest market, slumped 4.9 percent to 1,926 yen.

Nippon Electric Glass extended yesterday’s decline, falling 5.1 percent, the most on the Nikkei, to 991 yen. The company had its rating slashed to “underperform” from “outperform” at Macquarie Group, which forecast three consecutive years of declining operating profit, according to a report dated June 21.

The glass maker may lose market share to LG Chem Ltd., Macquarie said. The South Korean company plans to start mass production of display glass this year and to supply LG Display Co. Ltd., a Nippon Electric Glass customer, according to Macquarie.

U.S. Outlook

Futures on the S&P 500 slipped 0.2 percent today. The index lost 0.7 percent yesterday in New York after the Fed cut its projection for U.S. growth and employment this year and next. Chairman Ben S. Bernanke and his colleagues forecast the U.S. economy, Japan’s second-largest export market behind China, will expand by between 2.7 percent and 2.9 percent this year, down from an April forecast of 3.1 percent to 3.3 percent.

Bernanke said some of the reasons for the slowdown will be temporary, such as higher commodity prices and supply-chain disruptions caused by Japan’s earthquake and tsunami. The Fed Chairman also said the central bank would this month complete its purchase of $600 billion worth of longer-term Treasuries, a measure designed to boost growth and asset prices by flooding the market with cash.

The yen depreciated to as low as 80.64 against the dollar today, compared with 80.27 at the close of stock trading in Tokyo yesterday after the Fed reiterated it doesn’t intend to add to its bond purchases. A weaker yen increases the value of overseas income for Japan’s exporters.

‘Buying the Dollar’

“Investors are buying back the dollar because there’s less expectation the Fed will take additional easing measures, said Kiyoshi Ishigane, a senior strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $84 billion. “That’s supportive of Japanese stocks.”

Among shares that gained today, Isuzu climbed the most on the Nikkei, adding 3.4 percent to 364 yen. The company forecast net income will rise 26 percent to 65 billion yen ($807 million) in the year ending March 2012. The target exceeded the median estimate of 45 billion yen projected by nine analysts surveyed by Bloomberg before today.

Suzuki Motor, 20 percent owned by Volkswagen AG, jumped 3.1 percent to 1,757 yen. The company forecast net income will rise 11 percent to 50 billion yen this fiscal year as production recovers from the earthquake.

Nissan Sales

Nissan Motor Co., Japan’s second-largest automaker, climbed 1.3 percent to 839 yen and was the most-actively traded stock in Japan. Sales this fiscal year will be “significantly higher” than in the previous 12-months, Chief Executive Officer Carlos Ghosn said yesterday ahead of earnings forecasts due today.

Nissan said after the market closed today that it expects net income of 270 billion yen this year, compared with the 237 billion yen average of five analyst estimates compiled by Bloomberg in the past 28 days.

Nippon Steel Corp., Japan’s largest maker of the metal, advanced 1.7 percent to 247 yen. The company raised steel prices 18 percent for April-September shipments to Japan’s biggest electronics makers, the Nikkei newspaper reported today, without saying where it obtained the information.

--Editors: Jason Clenfield, John McCluskey.

To contact the reporters on this story: Akiko Ikeda in Tokyo at iakiko@bloomberg.net; Toshiro Hasegawa in Tokyo at thasegawa6@bloomberg.net.

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


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