Japan Stocks Fall on Concern Provisions to Hurt Bank Earnings

By Masaki Kondo
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Aug. 7 (Bloomberg) -- Japan's stocks fell, led by banks, on concern asset writedowns will mount and an economic slowdown will force lenders to increase bad-loan provisions, denting earnings.

Chuo Mitsui Trust Holdings Inc. sent banks to their lowest in four months after profit fell by half and American International Group Inc. posted $5.36 billion in writedowns. Daikin Industries Ltd., the world's second-biggest maker of air conditioners, plunged the most in 16 years after cutting its profit target. Fuji Heavy Industries Ltd. rose a second day as the yen fell against the dollar to the weakest in seven months.

``What's behind the drop in the market is worsening fundamentals in the Japanese and U.S. economies,'' said Kiyoshi Ishigane, a senior strategist at Mitsubishi UFJ Asset Management Co., which oversees the equivalent of $61 billion. ``AIG's results were a kind of litmus test of investor sentiment.''

The Nikkei 225 Stock Average slipped 129.90, or 1 percent, to close at 13,124.99 in Tokyo. The broader Topix index fell 18.46, or 1.5 percent, to 1,258.81. Almost five stocks fell for each that rose on the Topix.

AIG, the world's biggest insurer by assets, said yesterday writedowns related to the U.S. housing slump wiped out its profit. Losses stemming from the collapse of the U.S. mortgage market have resulted in more than $493 billion in asset writedowns and credit losses among the world's largest financial institutions, according to data compiled by Bloomberg News.

Chuo Mitsui, the nation's 11th-largest bank, retreated 4 percent to 605 yen. The lender yesterday posted a 52 percent drop in first-quarter net income with bad loan-related costs more than doubling. UBS AG cut its 12-month price estimate by 12 percent.

Nikkei futures expiring in September declined 0.6 percent to 13,150 in Osaka and sank 0.8 percent to 13,145 in Singapore.

To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.