Japanese Stocks Fall on Slowing Growth, U.S. Bailout Concerns

By Patrick Rial

Sept. 24 (Bloomberg) -- Japan stocks fell amid concern global economic growth will slow and after some U.S. lawmakers showed opposition to a proposed bailout for financial companies.

Sumitomo Mitsui Financial Group Inc., Japan's third-largest listed bank, declined 2.2 percent. Komatsu Ltd. fell 3.9 percent after Nomura Holdings Inc. said demand for construction machinery will weaken. Nomura, the nation's biggest brokerage, jumped after agreeing to buy Lehman Brothers Holdings Inc.'s European unit.

Japan's markets were closed yesterday for a holiday as a benchmark of Asian shares slumped 2.2 percent. U.S. stocks fell on concern Congress will hold up passage the proposed bailout.

``A lot of political pressure is coming to bear on the plan, and it doesn't look like it's going to pass smoothly,'' said Koichi Ogawa, chief portfolio manager, at Tokyo-based Daiwa SB Investments Ltd., which manages $28 billion. ``The slowdown hitting the U.S. is extremely serious, and if some kind of fiscal response isn't made, the global economy will take a big hit.''

The Nikkei 225 Stock Average declined 173.39, or 1.4 percent, to 11,917.20 as of 10:16 a.m. in Tokyo. The broader Topix index retreated 22.84, or 2 percent, to 1,145.85.

Federal Reserve Chairman Ben S. Bernanke said in testimony before Congress yesterday that the government should buy devalued assets at above-market values. Some lawmakers expressed reluctance to sponsor the bailout package, saying it appears to aid financial companies at the expense of taxpayers.

Sumitomo Mitsui lost 3.1 percent to 654,000 yen. Shinsei Bank Ltd., the former Long Term Credit Bank of Japan, slumped 6.1 percent to 294 yen after cutting its profit forecast on expected losses from Lehman Brothers investments. Orix Corp., Japan's largest leasing company, fell 5 percent to 13,730 yen.

`Nasty' Recession

HSBC Holdings Plc strategists led by London-based Richard Cookson said in a note investors should sell stocks from developed markets because the U.S. bailout plan won't stop a ``nasty and long-lasting'' recession.

Komatsu fell 4.4 percent to 1,883 yen. Hitachi Construction Machinery Co., the world's largest maker of giant excavators, declined 4.2 percent to 2,400 yen.

Nomura analyst Katsushi Saito cut his rating on Komatsu to ``buy'' from ``strong buy'' and lowered Hitachi to ``neutral'' from ``buy.'' The slowing global economy is likely to reduce demand for the companies' products, particularly in Europe, Japan and emerging markets, according to the analyst.

Nomura rallied 2.4 percent to 1,464 yen, bringing its three- day gain to 24 percent. The brokerage agreed yesterday to buy bankrupt Lehman's European operations for an undisclosed amount. The move came a day after Nomura said it will buy Lehman's Asian business for $225 million.

Mitsubishi UFJ Financial Group Inc., the country's biggest lender by value, fared better than rivals after saying it will purchase as much as 20 percent of U.S. brokerage Morgan Stanley at a price of up to $8.4 billion. The stock lost 1.2 percent to 887 yen while the 84-member Topix Banks index sank 2.5 percent.

Nikkei futures expiring in December dropped 1.4 percent to 11,880 in Osaka and Singapore.

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