Japan's Stocks Fall on Credit Concern; T&D Leads Insurer Drop

By Masaki Kondo

Aug. 19 (Bloomberg) -- Japan's stocks fell, sending the Nikkei 225 Stock Average to its biggest slump in a month, on concern turbulence in global credit markets will linger and weigh on earnings at financial companies.

T&D Holdings Inc., Japan's second-largest publicly traded insurer, headed for the lowest close in four months after Barron's said the U.S. government is preparing to rescue mortgage lenders Fannie Mae and Freddie Mac. Seven & I Holdings Co., the nation's biggest retailer, lost 2.4 percent and Nintendo Co. sank to a five-month low as the Bank of Japan said the domestic economy has been ``sluggish.''

The Nikkei 225 declined 304.57, or 2.3 percent, to 12,860.88 as of 1:13 p.m. in Tokyo, headed for the biggest drop since July 8. The broader Topix index tumbled 27.80, or 2.2 percent, to 1,235.95. All but one of 33 industry groups on the Topix fell.

``What lies underneath today's decline is investors' concerns about the prospects for the global economy,'' said Masaru Hamasaki, a senior strategist in Tokyo at Toyota Asset Management Co., which manages about $3.3 billion. ``Anything related to financial companies is taken negatively and spurs their sell-offs because investor confidence in the sector has weakened.''

The U.S. may recapitalize Fannie and Freddie, which own or guarantee 42 percent of the $12 trillion in U.S. home loans, Barron's said, citing a person in the Bush administration it didn't identify. The lenders shares fell the most in almost two decades, sending U.S. stocks down the most in more than a week.

The collapse of the U.S. mortgage market has sparked more than $500 billion in asset writedowns and credit losses at global financial companies.

Forecast Cuts

The Bank of Japan today left its benchmark interest rate at 0.5 percent, saying economic growth has been sluggish owing to rising costs and weakening exports. Before the announcement, Nomura Securities Co. cut its forecast for domestic growth this year to 0.7 percent from its May estimate of 1.1 percent.

T&D dived 5.1 percent to 5,380 yen, the lowest since April 1, leading a gauge of insurers to the lowest since March 17. Sumitomo Mitsui Financial Group Inc., Japan's second-biggest bank by market value, sank 2.1 percent to 686,000 yen, while Orix Corp., the nation's biggest non-bank financial company, lost 3.5 percent to 13,360 yen.

Mitsubishi UFJ Financial Group Inc., Japan's largest publicly traded bank, dropped 1.5 percent to 832 yen after raising its bid for UnionBanCal Corp. by 17 percent to $3.5 billion to gain full control of the California lender.

Seven & I slid 2.4 percent to 3,270 yen. Nintendo, the world's largest maker of handheld game players, sank 3.3 percent to 48,750 yen in Osaka trading, the lowest since March 17. Matsuya Co., which operates a department store in the Ginza section of Tokyo, tumbled 7.7 percent to 1,970 yen, set for the sharpest drop since Jan. 4. The company yesterday cut its annual net income target by more than half, citing ``increasingly defensive'' consumers.

Nikkei futures expiring in September retreated 2.4 percent to 12,850 in Osaka and slumped 2.3 percent to 12,860 in Singapore.

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