Japan Stocks Fall a 2nd Day on Toyota Target Cut, U.S. Jobs

By Masaki Kondo

Nov. 7 (Bloomberg) -- Japanese stocks plunged a second day after Toyota Motor Corp. predicted its lowest profit in nine years and U.S. jobless claims jumped to a 25-year high.

Toyota, the world's second-biggest automaker, wasn't traded as orders to sell exceeded those to buy, while its truck-making unit Hino Motors Ltd. plummeted 13 percent. Honda Motor Co. fell 14 percent. Inpex Corp., Japan's largest oil explorer, declined 11 percent after crude fell to the lowest level in 19 months.

The Nikkei 225 Stock Average sank 540.47, or 6.1 percent, to 8,358.67 as of 9:39 a.m. in Tokyo, extending yesterday's 6.5 percent drop. The broader Topix index fell 49.70, or 5.5 percent, to 859.60. The Nikkei is headed for a weekly decline of 2.5 percent, while the Topix was set to lose 1.1 percent.

``We expected the global economy would weaken, but it's deteriorating much faster than we feared,'' Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages about $53 billion, said in an interview with Bloomberg Television. ``I didn't imagine Toyota would be forced to lower its earnings forecast by this degree.''

Toyota more than halved its annual profit forecast yesterday, expecting a 68 percent drop from a year earlier. Tighter credit and worsening consumer sentiment drove industry-wide U.S. car sales last month to the lowest level since 1991. The yen's 12 percent gain against the dollar and 24 percent appreciation versus the euro this year is also squeezing profit at Toyota and other Japanese exporters.

U.S. Unemployment

Toyota was set to fall 9.2 percent, while Honda plummeted 14 percent to 2,125 yen, headed for the steepest drop since October 1987. Hino retreated 13 percent to 217 yen. Mazda Motor Corp., which earns more than half its profit from Europe, slumped 10 percent to 193 yen. A gauge of automakers was the second-worst performer among 33 industry groups on the Topix after an index of mining companies.

``Yen strength was exacerbated by declines in unit sales and in North American production,'' Tatsuo Yoshida, an analyst for UBS AG, wrote in a report yesterday. He lowered his rating on Toyota to ``neutral'' from ``buy.''

The Japanese currency appreciated against the euro to as much as 123.27 from 126.07 at the close of stock trading in Tokyo yesterday. A stronger yen lowers the value of repatriated sales of Japanese companies.

Olympus Corp., an endoscope maker that counts Europe as its biggest overseas market, was poised to tumble after the stronger local currency forced the company to cut its annual profit outlook by more than half.

Jobless Claims

The Labor Department said U.S. workers receiving unemployment-insurance checks totaled 3.843 million in the week ended Oct. 25, the highest level since 1983. The report foreshadowed a surge in the unemployment rate when the department releases its October jobs report later today.

The worsening economic outlook diminished prospects for commodities demand. Crude oil for December delivery fell 6.9 percent to $60.77 a barrel in New York, the lowest settlement since March 2007, while copper futures for December delivery slid 5.1 percent, extending a two-day slump to 12 percent.

Inpex declined 11 percent to 536,000 yen, while closest competitor Japan Petroleum Exploration Co. lost 9.1 percent to 3,790 yen. Sumitomo Metal Mining Co., the nation's second-biggest copper smelter, retreated 7 percent to 703 yen.

Nikkei futures expiring in December retreated 5.5 percent to 8,320 in Osaka and slumped 6.2 percent to 8,320 in Singapore.

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