Japan Stocks Drop on Renewed Writedown Concern; Toyota Declines

By Patrick Rial

July 29 (Bloomberg) -- Japan stocks fell to the lowest in a week on renewed concern about financial market losses and signs surging energy costs are eroding profits and consumer spending.

Sumitomo Mitsui Financial Group Inc., Japan's second-largest bank by market value, fell to the lowest in two weeks after additional writedowns prompted Merrill Lynch & Co. to announce a share sale. Toyota Motor Corp. retreated after lowering its sales forecast, and mobile carrier NTT DoCoMo Inc. declined after Japan's unemployment rate rose to the highest in almost two years.

``Investors have no way of seeing how deep this global economic downturn is going to take us,'' Mamoru Shimode, Tokyo- based chief equity strategist at Deutsche Bank AG, said in an interview with Bloomberg Television. ``Chances are, we'll see the impact start to appear through lower earnings forecasts.''

The Nikkei 225 Stock Average declined 237.46, or 1.8 percent, to 13,116.32 as of 9:30 a.m. in Tokyo. The broader Topix index slipped 26.70, or 2.1 percent, to 1,274.09. That was the lowest for both gauges since July 18, and the Nikkei lost all gains it made last week in its second-best weekly performance of the year.

Sumitomo Mitsui slumped 3.6 percent to 815,000 yen. Mizuho Financial Group Inc., the country's third-biggest bank by market value, tumbled 3.3 percent to 524,000. Nomura Holdings Inc., which reports first-quarter profit today, lost 3.5 percent to 1,534 yen.

IMF Forecast

Merrill Lynch said it will raise an additional $8.5 billion by selling shares and take a $5.7 billion writedown because of losses on collateralized debt obligations, sending its shares to the lowest since October 1998.

Meanwhile, the International Monetary Fund said financial institutions may be forced to raise more capital as the U.S. housing market recession deepens. The IMF stood by its forecast for $1 trillion in credit market losses in a report released yesterday. Financial institutions worldwide have suffered $468.5 billion writedowns and credit losses stemming from the collapse of he subprime mortgage market, according to Bloomberg data.

Toyota, the world's largest automaker by value, lost 3.9 percent to 4,690 yen. The company cut its sales estimate for 2008 by 350,000 vehicles to 9.5 million as record U.S. gas prices erode demand for large vehicles. Auto-parts maker Aisin Seiki Co. tumbled 7 percent to 3,050 yen.

Tokyo Electric Power Co., Japan's biggest electricity producer, dropped 1.2 percent to 2,780 yen after saying yesterday it will likely post a record net loss of 280 billion yen ($2.6 billion) this fiscal year as the closure of a nuclear plant forced it to use more petroleum. Kansai Electric Power Co., the nation's No. 2 power producer, fell 1.5 percent to 2,385 yen after predicting a 55 billion yen loss.

Unemployment, Spending

NTT DoCoMo, Japan's largest mobile-phone operator, slipped 1.4 percent to 164,100 yen. Mitsubishi Estate Co., the country's biggest property developer by market value, dropped 3.4 percent to 2,525 yen.

Japan's jobless rate climbed to 4.1 percent in June, the highest level in almost two years, the statistics bureau said today. Economists had forecast the gauge to remain at 4 percent. Household spending fell 1.8 percent, a fourth month of decline.

Matsushita Electric Works Ltd. plunged 8.3 percent to 940 yen after analysts slashed forecasts for the company following a decline in profit announced on July 25. Ryohei Masumoto, an analyst at Nikko Citigroup Ltd., called the 25 percent drop in first quarter operating profit ``grim'' as sales of profitable fitness equipment declined.

Nikkei futures expiring in September lost 1.4 percent to 13,170 in Osaka and fell 1.5 percent to 13,165 in Singapore.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.