Japan's Stocks Decline on Capital Concern; Inpex Drops on Oil

By Makiko Kitamura and Masaki Kondo

July 8 (Bloomberg) -- Japan's stocks fell, led by banks on renewed concern U.S. financial companies will be forced to raise more capital and as a drop in oil prices dimmed the earnings prospects for commodities-related companies.

Nomura Holdings Inc., Japan's largest brokerage, and Mizuho Financial Group Inc. retreated after analysts said the two largest U.S. mortgage lenders will need to raise capital and Merrill Lynch & Co. may report a loss. Inpex Holdings Inc., Japan's biggest oil explorer, fell the most in two weeks after oil sank more than $3 a barrel. Kawasaki Kisen Kaisha Ltd. led gains among shippers after transport fees rose.

``We are very likely to see more banks raise capital, and financial stocks will remain turbulent,'' said Yoku Ihara, head of equity research at Tokyo-based Retela Crea Securities Co. ``Japan's market is directionless and mainly driven by news from overseas.''

The Nikkei 225 Stock Average fell 170.46, or 1.3 percent, to 13,189.58 as of 9:54 a.m. in Tokyo, the lowest since April 16. The broader Topix index dropped 14.56, or 1.1 percent, to 1,298.24. Almost four stocks fell for every one that rose.

Freddie Mac and Fannie Mae fell to the lowest in 13 years in New York after Lehman Brothers Holdings Inc. analysts said yesterday an accounting change may force them to raise a combined $75 billion to overcome further writedowns.

Merrill Lynch, the third-largest U.S. securities firm, may report a second-quarter loss after $6 billion of writedowns, Citigroup Inc. analysts said yesterday.

Nomura fell 2.7 percent to 1,534 yen, and Mizuho dropped 2 percent to 502,000 yen. Mitsubishi UFJ Financial Group Inc. retreated 1.9 percent to 949 yen, and Sumitomo Mitsui Financial Group Inc. declined 2.1 percent to 787,000 yen.

Trading Houses, Shippers

Crude oil traded at $141.41 and fell for the first time in four days yesterday amid signs economic growth and energy demand is slowing across Europe.

Inpex dropped 2.2 percent to 1,310,000 yen. Itochu Corp., which invests in Russia's Sakhalin oil projects, tumbled 2.9 percent to 1,065 yen, and rival trading company Mitsui & Co. fell 3.1 percent to 2,205 yen.

Kawasaki Kisen, Japan's third-largest shipping line, rose 1.8 percent to 978 yen, and larger rival Mitsui O.S.K. Lines Ltd. gained 1.4 percent to 1,460 yen. The Baltic Dry Index, a measure of shipping costs for commodities, gained 1.2 percent yesterday, ending a five-day decline.

Nikkei futures expiring in September added 1.1 percent to 13,220 in Osaka and gained 0.9 percent to 13,235 in Singapore.

To contact the reporters for this story: Makiko Kitamura in Tokyo at mkitamura1@bloomberg.net; Masaki Kondo in Tokyo at mkondo3@bloomberg.net.