Most Japan Stocks Fall on Lower Shipping Rates, Bailout Doubts

By Patrick Rial

Sept. 26 (Bloomberg) -- Most Japanese shares fell, led by shipping companies, as cargo rates plunged. Lenders pared gains as the biggest bank failure in history coincided with conflict over the passage of a $700 billion financial rescue package.

Mitsui O.S.K. Lines Ltd., Japan's second-biggest bulk carrier, fell to the lowest in almost two years. Mizuho Financial Group Inc. pared a 2.6 percent advance to gain 0.4 percent as a deal struck by lawmakers yesterday on the financial bailout appeared to be in jeopardy. Sumitomo Mitsui Financial Group Inc. was unchanged following an earlier 2.6 percent advance after regulators seized Washington Mutual Inc.

The Nikkei 225 Stock Average fell 23.19, or 0.2 percent, to 11,983.34 at the 11 a.m. break in Tokyo. It earlier rose and fell as much as 0.6 percent. The broader Topix index added 0.86, or 0.1 percent, to 1,154.67. About two shares dropped for each that climbed on the Topix, which headed for a 0.5 percent weekly gain.

``The assumption is that the bailout will take longer than expected, which is negative,'' said Tsuyoshi Shimizu, a senior fund manager at Mizuho Asset Management Co., which oversees $26 billion. ``The longer it takes to pass something, the more victims we're going to see.''

Mitsui O.S.K. lost 3.8 percent to 972 yen, the lowest since November 2006. Kawasaki Kisen Kaisha Ltd., the country's third- biggest shipping line, plunged 6.4 percent to 676 yen, the steepest drop in six weeks.

The Baltic Dry Index, a measure of commodity-shipping rates, dropped 7.3 percent yesterday, bringing its three-day slide to 16 percent, the most since at least 1985, on weaker demand for steel from Chinese construction companies.

`Complete Recession'

``Further declines in the Baltic will push the shipping industry into a complete recession,'' said Yoshihisa Miyamoto, an analyst in Tokyo at Okasan Securities Co. ``Investors who sell the shipping stocks short stand to make a lot of money.''

Mizuho, Japan's second-largest listed bank, rose 0.4 percent to 465,000 yen. Sumitomo Mitsui, the third biggest, fell 0.4 percent to 684,000. T&D Holdings Inc., Japan's largest publicly traded life insurer, added 0.7 percent to 5,920 yen, retreating from a 2.7 percent climb earlier.

U.S. lawmakers agreed on principles for a plan to let the Treasury buy troubled assets of financial firms, Senate Banking Committee Chairman Christopher Dodd said yesterday. Republicans offered a new plan late last night that seeks ``temporary tax relief'' provisions aimed at allowing financial companies to free up capital. Dodd, a Democrat, said returning to negotiations could delay passage of a bill.

WaMu Seizure

WaMu, the biggest U.S. thrift bank, was seized by the Federal Deposit Insurance Corp. as credit downgrades spurred a collapse of the lender riddled with subprime losses. JPMorgan Chase & Co. will buy deposits and branches, bringing the bank's size up one notch to No. 2 among U.S. lenders.

CSK Holdings Corp. fell 9.4 percent to 1,646 yen after the software developer reversed its full-year forecast to a loss, citing unprofitable projects.

Furukawa Electric Co., whose products include optical fiber cables and air conditioner parts, slumped 7.6 percent to 463 yen after Goldman, Sachs & Co. lowered the shares to ``neutral'' as demand for copper pipes and industrial materials has weakened.

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