Bloomberg News

Japan Stocks Falls on Industrial Output, Growth Concern

August 31, 2012

Japan stocks fell a second day after consumer prices data pointed to little progress in the fight against deflation and industrial production unexpectedly dropped amid concern about a deepening global slowdown.

Makita Corp. (6586) fell 3.3 percent, pacing declines among machinery makers. Ricoh Co., an office-equipment maker that counts on the Americas and Europe for almost half its sales, lost 3.8 percent after U.S. jobless claims rose and euro-area confidence fell. Nippon Steel Corp. (5401) and Sumitomo Metal Industries Ltd. (5405) slid as they widened loss forecasts ahead of their merger. Sharp Corp. (6753) plunged 13 percent after Foxconn Technology Group’s chairman left Japan without finalizing a deal to invest in the loss-making electronics company.

“Japan’s industrial production data is very bad,” said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd., which oversees the equivalent of $76 billion. “The economy will slow down with domestic demand falling as the government’s eco- car program and other measures wind down, while overseas demand is deteriorating.”

The Nikkei 225 Stock Average (NKY) declined 1.6 percent to 8,839.91 at the 3 p.m. close in Tokyo, with volume 6.4 percent above the 30-day average. The gauge fell 2.5 percent this week, paring the monthly advance to 1.7 percent. The broader Topix (TPX) Index lost 1.6 percent to 731.64, with more than four times as many shares declining as advancing.

The Topix has fallen 16 percent from this year’s peak on March 27 on concern earnings will be hurt by Europe’s debt crisis and slowing growth in China and the U.S. Retail sales fell more than expected as the government winds down incentives for energy-efficient vehicles and other measures to stimulate demand.

Topix Valuations

The decline has cut the price of shares on the Topix to 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index and 1.5 for the Europe Stoxx 600 Index. A number less than one means companies can be bought for less than the value of their assets.

Consumer prices dropped 0.3 percent from a year earlier, underscoring concern that the central bank is making little progress in its fight against deflation and may miss its 1 percent inflation goal. Japan’s industrial production slid 1.2 percent in July from June, the Trade Ministry said in Tokyo today. The median estimate of 27 economists surveyed by Bloomberg News was for a 1.7 percent increase.

Machinery manufacturers fell. Makita dropped 3.3 percent to 2,664 yen. Toshiba Machine Co. lost 2.5 percent to 310 yen.

Steelmakers led declines among the Topix’s 33 industry groups. Nippon Steel and Sumitomo Metal Industries, which will merge in October to become the world’s second-largest steelmaker, widened first-year loss estimates on a combined 240 billion yen ($3.1 billion) in impairment charges. Nippon Steel sank 5.6 percent to 151 yen, while Sumitomo Metal Industries lost 5.1 percent to 111 yen.

U.S. Jobs

Futures on the S&P 500 (SPXL1) were little changed today. The gauge lost 0.8 percent yesterday after a report showed more Americans than expected filed applications for unemployment last week, a sign the labor market is faltering amid a slowing economy.

Federal Reserve Chairman Ben S. Bernanke is scheduled to speak today at a meeting of central bankers in Wyoming. Fed policy makers have said they are prepared to provide new stimulus “fairly soon” unless there is evidence of “substantial and sustainable.”

Stocks also fell after a report showed economic confidence in the euro area fell more forecast to a three-year low in August and Spain’s Prime Minister Mariano Rajoy said his government would delay requesting a full bailout.

Yen Climbs

The Japanese currency gained versus most of its major peers. The yen appreciated to as high as 78.40 against the dollar today in Tokyo, compared with 78.63 at the close of stock trading yesterday. Japan’s currency strengthened to 98.03 against the euro from 98.71. A stronger yen cuts overseas income at Japanese companies when repatriated.

Ricoh declined 3.8 percent to 616 yen. Honda Motor Co. (7267), a carmaker that gets half of its revenue from North America and Europe, slipped 2.4 percent to 2,472 yen.

Sharp declined the most on the Nikkei 225, falling 13 percent to 198 yen. Foxconn Technology Group founder Terry Gou ended a visit to Japan without announcing the conclusion of a deal to invest in the Osaka-based company.

Foxconn and Hon Hai Precision Industry Co. agreed in March to buy 9.9 percent of Japan’s biggest liquid-crystal display maker. The deal is being renegotiated after Sharp widened its loss forecast and the stock plunged to a 30-year low. The company faces 706 billion yen ($9 billion) of debt maturing within a year, and is shedding jobs for the first time since 1950 to cut costs.

-- With assistance from Masaaki Iwamoto in Tokyo. Editors: Jim Powell, 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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