Bloomberg News

Japan Stocks Fall on Rising Yen, Disappointing Earnings

October 26, 2012

Japan stocks fell, with the Nikkei 225 Stock Average paring a three-month advance, after the yen strengthened from a four-month low and companies including Canon Inc. and Fanuc Corp. (6954) reported disappointing earnings.

Canon, the world’s biggest camera maker, fell 3.2 percent after cutting its profit forecast as consumers switch to smartphones for taking pictures. Fanuc, the world’s leading producer of factory robotics, slid 3.1 percent after posting first-half earnings that missed its projections. Sharp Corp., Japan’s largest maker of liquid-crystal displays, gained 3.8 percent on a report the loss-making company is seeking investment from U.S. technology firms.

The Nikkei 225 fell 1.4 percent to 8,933.06 at the 3 p.m. close in Tokyo, falling 0.8 percent on the week and heading for a 0.7 percent monthly gain. The broader Topix (TPX) Index lost 1.4 percent to 741.23, with more than twice as many shares declining as advancing. The nation’s central bank will open a policy meeting on Oct. 30.

“Expectations for Bank of Japan stimulus have peaked,” said Kenichi Hirano, general manager and strategist at Tachibana Securities in Tokyo. “Some investors are selling shares to lock in profit at the end of the week. Japanese earnings haven’t been as good as expected, and the forecasts are severe due to the sluggish global economy.”

The Topix has risen 3.1 percent since Sept. 6 after the European Central Bank started a global wave of easing to boost growth, with the U.S. Federal Reserve and the Bank of Japan following suit. Shares on the stock gauge traded at 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.

Stimulus Measures

Japan’s government today announced 750 billion yen ($9.4 billion) of stimulus to shore up growth. The Bank of Japan is expected to take easing steps next week after the nation’s consumer prices fell a fifth straight month, adding pressure for measures to end deflation and revive the economy. A Bloomberg survey indicated the central bank is expected to expand an asset-purchase program by 10 trillion yen.

The Japanese currency strengthened against all of its major counterparts as corporate earnings concerns dragged down stocks, boosting demand for haven assets. The yen rose to 80.08 against the dollar at the close of stock trading today after falling as low as 80.38, the weakest since June 25.

Of the Topix-listed companies that have reported earnings since the beginning of October and for which estimates are available, 55 percent have missed expectations. Earnings season peaks next week, with 571 of 1,672 Topix companies reporting.

Canon Earnings

Canon (7751) fell 3.2 percent to 2,560 yen after cutting its net- income projection for this year by 6.4 percent to 234 billion yen. It also lowered its sales estimate for compact cameras by 9.5 percent and for professional models by 4.3 percent.

Fanuc sank 3.1 percent to 12,570 yen after net income fell 9.8 percent to 67 billion yen in the six months ended Sept. 30, missing its forecast by 11 percent, as slower demand for goods in Europe dented production and deterred manufacturers from investing in new equipment. Fanuc also said full-year profit may drop 2 percent to 136 billion yen.

Yamaha Corp. (7951) declined the most on the Nikkei 225 (NKY), falling 8 percent to 717 yen. The maker of musical instruments fell after issuing a preliminary earnings statement that showed net income totaled 3.3 billion yen in the six months ended Sept. 30, missing its forecast by 45 percent, citing lower-than-expected sales.

Sharp Investment

Sharp led gains on the Nikkei 225. The stock climbed 3.8 percent to 166 yen after Asahi newspaper reported Sharp is seeking investments from Hewlett-Packard Co., Intel Corp., Microsoft Corp., Google Inc. and Apple Inc. The Japanese company is seeking partners after negotiations with Foxconn Technology Group over a stake sale stalled.

Futures on the Standard & Poor’s 500 Index slid 0.7 percent today. The gauge gained 0.3 percent yesterday in New York amid better-than-estimated corporate earnings. U.S. jobless claims fell last week, showing some progress in the labor market. Americans signed fewer contracts than forecast in September to purchase previously owned homes, a sign the industry’s recovery will be uneven, report showed yesterday.

The Nikkei Stock Average Volatility Index (VNKY) jumped 4.8 percent to 20.49, indicating that traders expect a swing of 5.9 percent on the equity benchmark in the next 30 days.

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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