Japanese Stocks Tumble to 4-Week Low as U.S. Recession Worsens

By Patrick Rial

Nov. 20 (Bloomberg) -- Japanese stocks slumped, sending the Nikkei 225 Stock Average below 8,000, as U.S. consumer prices dropped the most on record and housing starts plunged, indicating a recession in the world's largest economy is deepening.

Nipponkoa Insurance Co. fell 8.2 percent after it and six listed peers cut profit forecasts as shareholdings plunged. Sony Corp., which gets 25 percent of its sales from North America, lost 5 percent as chances for a U.S. automaker bailout package dwindled, heightening concerns of a protracted recession. Mitsubishi Corp., Japan's biggest trading company, plummeted 10 percent economic concerns drove commodities lower.

The Nikkei 225 dropped 381.07, or 4.6 percent, to 7,892.15 as of 9:33 a.m. in Tokyo, the lowest since Oct. 28. The broader Topix index slid 32.79, or 4 percent, to 794.64. In New York, the Dow Jones Industrial Average fell below 8,000 to close at the lowest since March 2003.

``Concerns are rising that the U.S. is entering a period of deflation and that the economic picture is getting bleaker,'' Juichi Wako, a Tokyo-based strategist at Nomura Holdings Inc., said in an interview with Bloomberg Television. ``There's really no good news to hang on to today.''

The Nikkei has fallen by 47 percent this year, as the credit crisis triggered by the collapse of the U.S. housing market fed into a global recession. More than half of Japanese companies cut their profit forecasts when reporting mid-term earnings during the past two months, according to Shinko Research Institute Co.

Deflation, Insurers

U.S. consumer prices plunged 1 percent last month, the most since records began in 1947, while housing starts tumbled to an annual rate of 791,000, an all-time low. The onset of deflation can be devastating for an economy as consumers and businesses delay spending to benefit from lower prices.

Nipponkoa lost 8.2 percent to 525 yen. The company slashed its profit forecast for the year ending in March by 31 percent. T&D Holdings Inc., Japan's largest publicly traded life insurer, was offered lower by 8.6 percent to 3,170 yen. The company reduced its profit estimate by 95 percent. A gauge of insurers lost 10 percent, the biggest decline among the 33 industry group included in the Topix.

Investments in hedge funds and private equities by T&D ``raises an alarm bell on the asset allocation; it is vulnerable to further collapse of the capital markets,'' John Russell, a Hong Kong-based analyst at HSBC Holdings Plc wrote in a note to clients. Russell downgraded T&D to ``neutral'' from ``outperform.''

Sony, the maker of the PlayStation3 game console, retreated 5 percent to 1,853 yen. Nippon Electric Glass Co., the world's third-biggest maker of glass for flat-panel televisions, fell 9.8 percent to 517 yen.

Crude, Copper

Mitsubishi, which gets more than half of its earnings from commodities trading, retreated 10 percent to 1,004, the lowest since July 2004. Rival Itochu Corp. declined 6.7 percent to 421.

A measure of six metals traded on the London Metal Exchange, including copper and zinc, fell 3.9 percent. Zinc dropped 3.7 percent, copper 4.3 percent and nickel 4.7 percent. Crude oil slumped to as low as $52.96, a level not seen since January 2007.

Nikkei futures expiring in December dropped 4.7 percent to 7,880 in Osaka and slid 4.9 percent to 7,885 in Singapore.

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