Japanese Stocks Decline as U.S. Financial Bailout Doubts Loom

By Patrick Rial

Sept. 25 (Bloomberg) -- Japanese shares fell as credit markets tightened amid mounting concern Congress won't pass a bailout package for the U.S. financial system.

Mitsubishi UFJ Financial Group Inc. fell 2.2 percent after lending rates between banks surged and U.S. lawmakers raised opposition to a $700 billion rescue plan. Re-plus Inc. was set to fall after becoming the 11th listed property-related company to go bankrupt in Japan this year, highlighting the funding difficulties afflicting real estate companies. Benchmarks also fell as many stocks lost the right to a dividend today.

Nissan Motor Co. led automakers lower after data showed export growth slowed last month as expansion in Asia wasn't able to offset weaker demand in the U.S. and Europe.

``There's not a lot of upside for this market today,'' Seiji Arai, a strategist at Mitsubishi UFJ Securities Co., said in an interview with Bloomberg Television. ``The bankruptcy of Re-plus reignites unease about the credit markets.''

The Nikkei 225 Stock Average fell 266.95, or 2.2 percent, to 11,848.08 as of 9:35 a.m. in Tokyo. The broader Topix index dropped 22.07, or 1.9 percent, to 1,145.90. All but one of the 33 industry groups in the Topix lost ground. Shares that lost the right to a dividend today had a 76 point negative effect on the Nikkei, according to data compiled by Bloomberg.

Mitsubishi UFJ, Japan's biggest bank, declined 2.1 percent to 910 yen. Orix Corp., the nation's largest leasing firm, fell 4.3 percent to 13,900 yen. Sumitomo Mitsui Financial Group Inc. lost 1.6 percent to 666,000 yen after the Nikkei newspaper said the nation's No. 3 listed bank won't take a stake in Goldman Sachs Group Inc., contradicting earlier reports.

Bush Speech

U.S. lawmakers are looking for alternatives to a plan by U.S. Treasury Secretary Henry Paulson to spend $700 billion to buy troubled assets of financial companies at prices above current valuations. Republican presidential candidate John McCain said Paulson's plan won't pass in its current form. President George W. Bush will speak at 10 a.m. Tokyo time regarding the rescue plan.

The one-month London interbank offered rate, or Libor, for dollars jumped 22 basis points to 3.43 percent, the highest since January as banks clamped down on lending to each other.

Condominium builder Re-plus filed for bankruptcy yesterday with 32.6 billion yen ($307 million) in debt. The company was unable to obtain financing due to the global credit crunch, it said in a statement. The shares were offered 600 yen lower at 7,570, with sell orders outnumbering those to buy.

Exports Slow

Joint Corp., another small property developer, plunged 6 percent to 266 yen. Atrium Co., which securitizes property, sank 9.1 percent to 518 yen after saying it made loans to Re-plus.

Nissan, which generates about two-thirds of its sales outside Japan, tumbled 5.6 percent to 758 yen. Toyota Motor Corp., the world's largest automaker by value, lost 2.9 percent to 4,670 yen. Takeuchi Manufacturing Co., a machinery maker that exports 90 percent of its products, dropped 5.4 percent to 1,496 yen.

Japanese exports grew 0.3 percent from a year earlier after rising 8 percent the previous month, the Finance Ministry said today. Economists had forecast a 2.3 percent increase.

Nippon Electric Glass Co., the world's third-biggest maker of glass for flat-panel televisions, gained 0.3 percent to 1,033 yen after boosting its earnings forecast for the six months ended Sept. 30, saying operating profit will likely climb 47 percent from the previous year.

Germany's Schott AG said yesterday it will make a tender offer for a 51 percent stake in Moritex Corp., a Japanese optical equipment maker. Schott is offering 740 yen per share, a 42 percent premium over yesterday's closing price. Moritex shares were poised to climb.

Nikkei futures expiring in December declined 2.1 percent to 11,870 in Osaka and slumped 1.6 percent to 11,880 in Singapore.

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