Japan's Nikkei 225 Falls Below 8,000 on Exports, U.S. Recession

By Patrick Rial

Nov. 20 (Bloomberg) -- Japanese stocks slumped, sending the Nikkei 225 Stock Average below 8,000 for the first time in four weeks, as the deepening global recession eroded earnings at insurers and prompted the fastest drop in exports in seven years.

Tokio Marine Holdings Inc., Japan's largest casualty insurer, plunged 15 percent after it and six listed peers cut profit forecasts as shareholdings plunged. Isuzu Motors Ltd., which generates a third of its sales in Asian markets, lost 17 percent after slashing payrolls to cope with lower overseas demand. Mitsubishi Corp., Japan's biggest trading company, plummeted 13 percent as commodities retreated.

The Nikkei 225 dropped 570.18, or 6.9 percent, to close at 7,703.04 in Tokyo, the lowest since Oct. 28 and the 10th steepest decline since 1970. The broader Topix index slid 45.15, or 5.5 percent, to 782.28.

``U.S. consumers have overextended themselves and the consequence of their retrenching is that there won't be any growth for the next five years,'' said Takashi Kamiya, who helps oversee $16 billion as chief economist at T&D Asset Management Co. in Tokyo. ``Long-term investors would be better off staying out of the stock market right now.''

In New York, the Dow Jones Industrial Average sank to the lowest since March 2003 as consumer prices and housing starts plunged and the chances for a U.S. automaker bailout package dwindled, heightening concerns for a protracted recession.

The Nikkei has fallen by half 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 midterm earnings during the past two months, according to Shinko Research Institute Co.

Longer Recession

Japan's exports fell 7.7 percent in October from a year earlier, the biggest drop since December 2001, the government said today. Tetsufumi Yamakawa, chief economist at Goldman, Sachs & Co. in Tokyo, said the nation's recession will likely be longer than average, changing his forecast for 2009 to a contraction instead of expansion.

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.

Tokio Marine fell by its daily limit of 400 yen, or 15 percent, to 2,220, the lowest since August 2003. The company slashed its profit forecast for the year ending in March, citing the declining value of investments. T&D Holdings Inc., Japan's largest publicly traded life insurer, tumbled by its limit of 14 percent to 2,970 yen. The company reduced its profit estimate by 95 percent. A gauge of insurers lost 15 percent, the biggest decline among the 33 industry groups on the Topix and the sector's sharpest sell-off since Black Monday.

`Alarm Bell'

Investments in hedge funds and private equity by T&D ``raises an alarm bell on the asset allocation,'' John Russell, a Hong Kong-based analyst at HSBC Holdings Plc, wrote in a note to clients. Russell cut T&D to ``neutral'' from ``outperform.''

Isuzu, which counts Thailand as its No. 1 overseas market, sank 17 percent to 123 yen, the lowest since June 2003. Mazda Motor Corp., which exports 80 percent of its output, tumbled 10 percent to 163 yen. The carmakers will cut at least 2,700 temporary jobs in Japan as they reduce production on falling demand. Morgan Stanley cut the Isuzu to ``equal weight'' today.

Nintendo Co., which made two-thirds of its sales abroad last year, tumbled 7.9 percent to 27,010 in Osaka. Nippon Electric Glass Co., the world's third-biggest maker of glass for flat- panel televisions, slumped 14 percent to 492 yen after larger rival Corning Inc. said it will halt an expansion plan in Thailand due to waning demand.

Japan's shipments to Asia fell 4 percent in October, today's report on exports showed, the first decline in more than six years. Exports to China fell for the first time in three years.

Commodities Slump

Mitsubishi, which gets more than half of its earnings from commodities, retreated 13 percent to 975, the lowest since May 2004. Rival Itochu Corp. declined 9.5 percent to 408 yen.

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

Sumitomo Mitsui Financial Group Inc., Japan's third-largest listed bank, lost 10 percent to 281,500 yen. The bank said yesterday after the market closed it plans to raise as much as 400 billion yen ($4.1 billion) by selling securities, confirming earlier reports it would sell new shares.

``The Japanese banking system has taken an unexpected turn for the worse with all of these lenders raising capital,'' said T&D's Kamiya. ``If the banks get in trouble, the economy will take a big hit.''

Mitsubishi Estate Co., Japan's No. 2 developer, tumbled 13 percent to 1,077 yen, the steepest drop in more than two decades. Nomura Real Estate Holdings Inc., with more than $3 billion in annual sales, fell 13 percent to 1,181 yen, a record low.

Commercial land prices in Tokyo retreated 6.2 percent from the previous year, according to a survey from the Japan Real Estate Institute released yesterday. That was the first decline since 2004. Residential property fell 8.2 percent.

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