Japan Stocks Drop as Recession Deepens, Nintendo Cuts Forecast

By Masaki Kondo

Jan. 30 (Bloomberg) -- Japanese stocks slumped, trimming gains on the Nikkei 225 Stock Average’s best week this year, as a record drop in factory production and forecast cuts at Toshiba Corp. and Nintendo Co. pointed to a worsening recession.

Nintendo tumbled 12 percent after lowering its sales target for the Wii game machine and projecting its first profit drop in five years. Toshiba Corp., Japan’s largest chipmaker, plunged 11 percent after forecasting a record loss and Goldman Sachs Group Inc. said the company may have to raise new capital. Fanuc Ltd., the world’s No. 1 industrial-robot maker, dived 6.3 percent after manufacturers cut production at an unprecedented pace last month.

The Nikkei 225 sank 248.44, or 3 percent, to 8,002.80 as of 10:05 a.m. in Tokyo, ending a three-day advance. The broader Topix index fell 20.29, or 2.5 percent, to 798.18. The Nikkei headed for a 3.3 percent weekly gain, the most since the period ended Dec. 19, on optimism President Barack Obama’s stimulus package will ease the global recession.

“Expectations for government measures have been fully priced into the market, and investor focus is returning to the deterioration of the global economy,” Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of $53 billion, said in an interview with Bloomberg Television.

The Nikkei is set to lose 9.6 percent in January, the steepest monthly drop since October, on concern waning demand will cripple company earnings and as Royal Bank of Scotland Group Plc’s loss forecast sparked concern the global financial crisis will deepen. The Topix was set for a 7.1 percent slide this month.

Worsening Recession

Japanese companies reporting third-quarter results posted a 24 percent tumble in net income for the quarter, Shinko Research Institute Co. said today in a report. The Nikkei lost a record 42 percent last year as the world’s biggest economies slipped into recession, and statistics released today showed Japan’s is headed for its worst contraction in the post-World War II period.

Factory output sank by a record 9.6 percent last month from November, the Trade Ministry said today before markets opened. Separate reports from the statistics bureau showed Japan’s unemployment rate jumped to 4.4 percent last month from 3.9 percent in November, while household spending fell 4.6 percent from a year earlier.

Wii Sales

Nintendo, the world’s biggest maker of handheld game players, tumbled by its daily limit of 12 percent to 28,300 yen in Osaka. The company yesterday cut its annual net income target by a third, saying it will book a 200 billion yen ($2.23 billion) foreign- exchange loss. The result prompted HSBC Securities Japan Ltd. to lower its rating on the stock to “neutral” from “overweight.”

Toshiba sank 11 percent to 343 yen, the sharpest plunge since October 1987. The company yesterday reversed its profit forecast to a net loss of 280 billion yen in the year to March 31. Goldman Sachs Group Inc. chopped its rating on the stock to “sell” from “neutral,” saying the bigger-than-expected loss will drive down the company’s net worth per share by more than a half at the end of March from a year earlier.

Fanuc slid 6.3 percent to 5,480 yen, en route for the biggest drop since Jan. 9. Kyocera Corp., the world’s largest solar-cell maker, sank 5.3 percent to 5,900 yen after saying net income fell 32 percent in the nine months ended Dec. 31. Kao Corp., Japan’s biggest maker of household goods, sank 8.7 percent to 2,200 yen after cutting its full-year net income forecast 13 percent.

Nikkei futures expiring in March sank 2.4 percent to 8,000 in Osaka and dived 2.7 percent to 7,995 in Singapore.

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