Japan Stocks Fall as Recession Concern Overshadows BOJ Rate Cut

By Masaki Kondo and Patrick Rial

Dec. 19 (Bloomberg) -- Japan’s stocks fell for the first time in three days as plunging commodities raised concern the recession will deepen, overwhelming the Bank of Japan’s attempt to boost the economy with its second rate cut in two months.

Inpex Corp., the nation’s biggest oil explorer, dived 5.9 percent as crude headed for a 22 percent drop this week. Idemitsu Kosan Co., Japan’s second-largest refiner, slumped 6.4 percent. Daiwa Securities Group Inc. surged 8.5 percent to a six-week high on speculation the sale of its Sanyo Electric Co. stake will boost its financial health.

“If they really supply a ton of money to the market, I will change my view on the BOJ, but today’s message is not strong enough,” said Masayuki Kubota, a senior fund manager who helps oversee $1.7 billion at Tokyo-based Daiwa SB Investments Ltd. “The actual effect on the economy is not that big.”

The Nikkei 225 Stock Average fell 78.71, or 0.9 percent, to close at 8,588.52 in Tokyo, posting a 4.3 percent weekly gain. The broader Topix index dropped 4.26, or 0.5 percent, to 834.43, with almost three stocks retreating for each that rose. The Topix added 2.6 percent on the week.

The Nikkei is set to lose 44 percent in 2008, its worst year on record, as Japan and the world’s biggest economies fell into recession. The government has announced three stimulus plans since August to jumpstart the economy, and today pledged to buy shares held by banks to save them from further writedowns.

The BOJ today reduced its benchmark interest rate to 0.1 percent from 0.3 percent, following its first rate cut this year Oct. 31. The central bank also proposed buying commercial paper to help businesses gain access to funds. The Nikkei and Topix briefly rallied after the announcement.

Slumping demand created a glut of oil, driving prices down 75 percent from a record $147.27 on July 11. Crude oil for January delivery declined 9.6 percent to $36.22 a barrel in New York yesterday, the lowest settlement since June 2004 and set for the biggest monthly drop since 1986.

To contact the reporters for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net.