Japan Stocks Drop as Recession Deepens; Toshiba, Nintendo Dive

By Masaki Kondo

Jan. 30 (Bloomberg) -- Japanese stocks slumped, trimming gains on the Nikkei 225 Stock Average’s best week this year, after Toshiba Corp. and Nintendo Co. cut forecasts and Japan slid toward its worst recession in the postwar period.

Toshiba and Nintendo lost more than 12 percent after cutting earnings targets on slowing sales. Fanuc Ltd., the world’s No. 1 industrial-robot maker, fell 6.7 percent as manufacturers lowered production by a record. Nippon Yusen K.K. plunged 16 percent, leading Japan’s biggest shipping lines lower after slowing commodities demand in China prompted them to cut profit targets.

“It’s getting scarier and scarier to ponder what will happen around March,” said Hiroshi Morikawa, a senior strategist at Tokyo-based MU Investments Co., which manages about $14 billion. “Deeper cuts in capital investment and workforce will probably be needed, and a slew of bad news in the coming months will likely batter investor sentiment.”

The Nikkei 225 sank 257.19, or 3.1 percent, to close at 7,994.05 in Tokyo, ending a three-day advance. The broader Topix index fell 24.44, or 3 percent, to 794.03. The Nikkei gained 3.2 percent this week, the most since the period ended Dec. 19.

The Nikkei lost 9.8 percent in January, the steepest monthly drop since October and the second-worst start to a year, trailing only last January’s 11 percent slide. The Topix fell 7.6 percent this month as waning demand crippled corporate profits and a loss forecast by Royal Bank of Scotland Group Plc reignited financial concerns.

Capital Concern

Japanese companies reporting third-quarter results posted a 24 percent tumble in net income for the period, Shinko Research Institute Co. said today in a report. The Nikkei fell by a record in 2008 as the world’s biggest economies slipped into recession, and the International Monetary Fund said this week Japan’s gross domestic product will shrink 2.6 percent this year, which would be the biggest contraction since World War II.

Factory output sank by a record 9.6 percent last month from November, the Trade Ministry said today, while separate government reports showed the jobless rate surged the most in 41 years to 4.4 percent and household spending fell for a 10th month.

Toshiba, Japan’s largest chipmaker, sank 17 percent to 318 yen, the sharpest plunge in at least 34 years, after reversing its annual forecast to a net loss of 280 billion yen ($3.13 billion). Goldman Sachs Group Inc. downgraded the stock to “sell,” saying a drop in the company’s net worth may force it to raise new capital.

Nintendo, the world’s biggest maker of handheld game players, tumbled 12 percent to 28,300 yen in Osaka, the sharpest drop since at least May 1990. The company cut its annual net income outlook by a third and slashed its sales target for the Wii game machine for the first time. HSBC Holdings Plc lowered its rating on the stock to “neutral” from “overweight.”

No Optimism

Fanuc slid 6.7 percent to 5,460 yen, the biggest drop since Jan. 9. Omron Corp., an electronic-components maker, slumped 6.6 percent to 1,077 yen in Osaka cutting its full-year net income forecast 95 percent on spending cutbacks in the chip and auto industries.

Kao Corp., Japan’s largest maker of household goods, sank 8.3 percent to 2,210 yen, while Shiseido Co., the nation’s top cosmetics maker, retreated 8.8 percent to 1,526 yen. Both companies cut full-year net income forecasts by more than 10 percent yesterday.

Sales of personal-care goods and chemicals “are likely to continue to be affected by the economic slowdown from fiscal 2009, and we cannot be optimistic about the outlook for them,” Hirohisa Shimura, a Tokyo-based analyst for UBS AG, wrote about Kao in a report dated yesterday.

Konica Rally

Nippon Yusen, the nation’s largest shipping line, dived 16 percent to 430 yen, leading peers to the biggest decline among 33 industry groups on the Topix. Closest competitor Mitsui O.S.K. lost 12 percent to 527 yen, and Kawasaki Kisen plunged 13 percent to 334 yen. The companies reduced their annual profit projections by at least a third after the Baltic Dry Index, a measure of commodity-cargo fees, fell to a record low last quarter.

Konica Minolta Holdings Inc. soared 11 percent to 712 yen, leading gains on the MSCI World Index. The maker of film used in liquid-crystal displays told analysts it expects cost cuts to boost operating profit next year. Its 12-month stock price estimate was raised 16 percent to 670 yen by Shin Horie, a Tokyo- based analyst at Goldman Sachs.

Nikkei futures expiring in March sank 3.2 percent to 7,940 in Osaka and retreated by the same degree to 7,950 in Singapore.

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