Japan Stocks Dive as Lower Demand Indicates Slump Is Deepening

By Masaki Kondo

Jan. 20 (Bloomberg) -- Japanese stocks dropped, sending the Nikkei 225 Stock Average to the lowest level in more than a month, as falling demand for services and commodities indicated the global economic slump is deepening.

Inpex Corp., Japan’s largest oil and gas explorer, retreated 5.2 percent after oil prices slid the most in a week. Kawasaki Kisen Kaisha Ltd. fell 6.2 percent after shipping fees for commodities declined for a third day. Chuo Mitsui Trust Holdings Inc. plunged 6.8 percent after KBC Securities recommended selling the stock and Royal Bank of Scotland Group Plc forecast the biggest loss ever reported by a U.K. company.

The Nikkei lost 257.67, or 3.1 percent, to 7,999.18 as of 10:25 a.m. in Tokyo, set for the lowest since Dec. 5. The broader Topix index dropped 18.65, or 2.3 percent, to 799.08, with almost six stocks declining for each that rose. U.S. markets were closed yesterday for a holiday and President-elect Barack Obama will be sworn in today.

The Nikkei dived by a record 42 percent last year when the collapse of the American mortgage market sparked a global financial crisis. Companies such as Toyota Motor Corp. and Sony Corp. are firing workers to cope with shrinking demand, and household spending on services fell 0.9 percent in November from the previous month as consumers cut back due to concern about the economy, according to today’s Trade Ministry report.

Inpex dropped 5.2 percent to 672,000 yen, sending a gauge of mining companies to the biggest decline among 33 industry groups on the Topix. Closest domestic rival Japan Petroleum Exploration Co. slipped 4.9 percent to 4,290 yen. Crude oil for February delivery plunged 5.8 percent to $34.40 a barrel in New York yesterday, the sharpest decline since Jan. 12.

Shipping Lines

Kawasaki Kisen, Japan’s third-largest shipping line, retreated 6.2 percent to 346 yen, and market leader Nippon Yusen K.K. lost 3.4 percent to 480 yen. Mitsui O.S.K. Lines Ltd., the nation’s second biggest, dropped 3.9 percent to 542 yen. The Baltic Dry Index, a measure of shipping costs for commodities, fell 1.5 percent yesterday.

Chuo Mitsui, the nation’s sixth-largest listed bank by assets, tumbled 6.8 percent to 331 yen. KBC cut its rating on the stock to “sell” from “hold” yesterday. Mizuho Financial Group Inc. lost 5.4 percent to 230 yen, and market leader Mitsubishi UFJ Financial Group Inc. fell 2.5 percent to 504 yen.

Royal Bank of Scotland yesterday said it may post a loss of as much as 28 billion pounds ($40 billion) this year, surpassing Vodafone Group Plc’s 22 billion-pound net loss in 2006. The stock plummeted 67 percent, the most since September 1988.

Bridgestone Corp., the world’s biggest tiremaker, slumped 4.8 percent after rubber prices gained for a second day yesterday. Sumitomo Rubber Industries Ltd. fell 5.5 percent to 657 yen. Yokohama Rubber Co., Japan’s second-biggest tiremaker, sank 4.1 percent to 371 yen. Rubber for June delivery rose 1.2 percent yesterday, bringing a two-day gain to 5 percent. It fell 2.1 percent today.

Nikkei futures expiring in March retreated 3.2 percent to 7,990 in Osaka and slumped 3.6 percent to 7,985 in Singapore.

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