Bloomberg News

Japanese Stocks Drop for Third Day on U.S. Debt Talk Failure

November 23, 2011

Nov. 22 (Bloomberg) -- Japanese stocks fell for a third day, with the Nikkei 225 Stock Average closing at its lowest level since March 2009, after a U.S. Congressional committee failed to agree on deficit cuts.

Nomura Holdings Inc., a brokerage that gets about 38 percent of revenue from the U.S. and Europe, dropped 1.7 percent. Central Japan Railway Co., the operator of the country’s busiest high-speed railway, slid 6.3 percent after agreeing to cover the entire cost of building stations for a magnetic-train line. Osaka Securities Exchange Co. climbed 4.6 percent after rival Tokyo Stock Exchange Group Inc. agreed to buy the bourse operator for at 129.6 billion yen ($1.68 billion).

“Investors are a bit fed up with politicians generally,” said Prasad Patkar, who helps manage about $1 billion at Platypus Asset Management Ltd. in Sydney. “Politicians have been behind the curve all along, and I think the market is feeling uneasy about that.”

The Nikkei 225 Stock Average dropped 0.4 percent to 8,314.74 as of the 3:00 p.m. close in Tokyo, paring losses of as much as 1.1 percent. The gauge has declined 7.5 percent this month, erasing October’s gains, as signs emerged that Europe’s debt crisis is spreading to major economies.

Debt Talks Fail

Futures on the Standard & Poor’s 500 Index added 0.3 percent today. The index dropped 1.9 percent in New York yesterday. The U.S. congressional committee tasked with cutting the deficit said it failed to reach an agreement, setting the stage for $1.2 trillion in automatic spending cuts in 2013 and fueling concern that stimulus measures that are set to expire will not be renewed.

Nomura slipped 1.7 percent to 237 yen. Daiwa Securities Group Inc., Japan’s second-largest brokerage, lost 0.4 percent to 245 yen.

JR Central, as Central Japan Railway is also known, declined 6.3 percent to 628,000 yen after agreed to pay for the 330 billion yen cost of building stations along a planned 9 trillion yen magnetic-train line from Tokyo to Osaka.

Among stocks that advanced, Osaka Securities Exchange climbed 4.6 percent to 440,500 yen after TSE, operator of Japan’s largest bourse, offered to buy 480,000 yen a share to for its smaller rival.

Exporters Gain

The broader Topix Index rose 0.1 percent to 717.79, reversing earlier losses of as much as 1 percent, as exporters advanced after the yen fell against the euro and the dollar.

The yen lost 0.6 percent to 104 per euro as of 3:58 p.m. in Tokyo from the close in New York yesterday, while it declined 0.3 percent to 77.08 per dollar. A weaker yen makes Japanese products more competitive abroad.

Sony Corp., Japan’s biggest exporter of consumer electronics, climbed 3.1 percent to 1,305 yen. Honda Motor Co., the nation’s second-largest carmaker by market value, advanced 2 percent to 2,195 yen. Nissan Motor Co. gained 1.8 percent to 665 yen.

“Valuations for Japanese stocks look cheap,” said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd., which oversees the equivalent of $68 billion. “Any gains may not be sustained given prevailing concerns about Europe and the U.S. The yen’s level has not been supportive of Japanese exporters.”

A report yesterday showed Japan’s exports fell in October for the time first time in three months, indicating the yen’s strength and Europe turmoil are slowing the nation’s recovery.

Olympus Surges

The Nikkei 225 fell 18 percent this year through yesterday, dragging down its valuation to 15.4 times estimated earnings, compared with about 18 times at the end of last year, according to data compiled by Bloomberg News.

Olympus Corp., the maker of cameras that admitted hiding losses for decades, surged 20 percent to 869 yen. An independent committee investigating inflated payments to advisers by the scandal-hit company said it has found no links to organized crime so far in its probe, according to a statement by Olympus.

--Editor: John McCluskey, Jim Powell.

To contact the reporter on this story: Jonathan Burgos in Singapore at jburgos4@bloomberg.net; Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

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


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