Japan’s Nikkei Falls, Led by Banks; Sony Drops on Stronger Yen

By Akiko Ikeda and Satoshi Kawano Businessweek

Japan’s Nikkei 225 Stock Average fell, led by banks on concern they will need to raise more capital, and as a stronger yen dragged down electric-appliance makers.


Mizuho Financial Group Inc., the nation’s No. 3 bank by market value, slid 1.2 percent. Mitsubishi UFJ Financial Group Inc., which holds about 20 percent of Morgan Stanley, dropped 2.4 percent, after the Wall Street Journal said U.S. prosecutors are investigating the New York-based bank. Sony Corp., the maker of Bravia televisions and that gets more than 70 percent of its sales abroad, lost 1.6 percent. Toyota Motor Corp. jumped 2.7 percent as the world’s largest carmaker forecast a higher profit.

Japanese banks need to reinforce their financial structures, which pale compared with those in other countries,” said Gentoku Kiyokawa, a fund manager in Tokyo at Fortis Investments. “A further weakening of the euro seems unavoidable as sovereign risks will likely increase in Europe.”

The Nikkei 225 sank 0.2 percent to 10,394.03 at the 3 p.m. close in Tokyo, after gaining as much as 0.9 percent. The Topix rose 0.1 percent to 932.83, with eight stocks falling for every seven that rose.

The Topix has gained 2.8 percent in 2010, compared with a 3.6 percent increase by the Standard & Poor’s 500 Index and a 0.4 percent slide by the Stoxx Europe 600 Index. Stocks in the Japanese benchmark are valued at 18.5 times estimated earnings, compared with 14.3 times for the S&P and 11.9 times for the Stoxx.

Banks were the biggest drag on the Topix on speculation Mizuho will sell 1 trillion yen ($11 billion) in shares. They extended declines after the Wall Street Journal reported Morgan Stanley is being probed by U.S. federal prosecutors over allegations it misled investors about mortgage derivatives.

Mizuho, Mitsubishi UFJ

Mizuho Financial Group fell 1.2 percent to 161 yen, a level not seen since Dec. 15. Mitsubishi UFJ, Japan’s largest publicly traded bank, dropped 2.4 percent to 449 yen. Sumitomo Mitsui Financial Group Inc., the nation’s No. 2, lost 0.6 percent to 2,798 yen.

“Banks have poor growth potential, so they cannot be mid- and long-term targets for investment,” Fortis Investments’ Kiyokawa said.

Sony slumped 1.6 percent to 3,040 yen, the lowest in three months. Fanuc Ltd., a maker of industrial robots that derives 80 percent of its revenue outside Japan, dropped 1.5 percent to 9,950. Daikin Industries Ltd., the world’s second-biggest air conditioner maker, fell 0.8 percent to 3,235 yen.

Yen Appreciates

I’m worried about the yen’s trend against the euro because the current level of the yen is higher than the levels projected by exporters,” said Hiroichi Nishi, an equities manager in Tokyo at Nikko Cordial Securities Inc.

The yen appreciated to as much as 116.57 against the euro from 117.66 in intraday trading. Against the dollar, the Japanese currency strengthened to as much as 92.44 from 92.94. The stronger yen reduces income when overseas revenue is converted into local currency.

Olympus Corp. tumbled 7.7 percent to 2,418 yen. The stock was the largest decliner in the Nikkei. The endoscope maker forecast net income will fall 56 percent to 21 billion yen this fiscal year. JPMorgan Chase & Co. analyst Hisashi Moriyama lowered his rating on the company to “underweight” from “neutral” and reduced a 12-month share price estimate 15 percent to 2,300 yen.

Stocks advanced in early trading, led by companies from Toyota to NTT Data Corp. which forecast profit increases.

Toyota Earnings Outlook

Toyota, which rallied 2.7 percent to 3,590 yen, was the biggest contributor to gains in the Topix. The automaker forecast profit to rise 48 percent to 310 billion yen ($3.35 billion) this fiscal year as it recovers from record North American recalls and expands sales in China and other Asian markets.

NTT Data, a network services provider, soared 11 percent to 357,000 yen, the biggest climb in the Nikkei. The company said full-year net income will rise 32 percent to 47 billion yen in the year started April 1. The company’s rating was increased to “buy” from “neutral” at UBS AG.

“The upward momentum for corporate earnings will continue and that’s where investors will focus,” said Kiyoshi Ishigane, a strategist in Tokyo at Mitsubishi UFJ Asset Management Co., which oversees about $64 billion.