Japan Stocks Decline as Recession Concern Deepens; T&D Climbs

By Masaki Kondo

Feb. 10 (Bloomberg) -- Japanese stocks slumped for a second day as lower earnings projections from Orix Corp. and Japan Steel Works Ltd. overshadowed optimism a bank-rescue plan in the U.S. will ease credit turmoil.

Orix, the nation’s largest non-bank financial company, sank 8.9 percent, while Japan Steel Works, which provides Paris-based Areva SA with nuclear-reactor parts, sank 7.5 percent. T&D Holdings Inc., Japan’s largest listed life insurer, jumped 6.8 percent ahead of the U.S. Treasury’s unveiling of a new bailout package. Nissan Motor Co. climbed 7.3 percent after saying it will cut 20,000 jobs as it tries to return to profit.

“Manufacturers are very likely to accelerate reductions in capital investment in the coming months,” said Hiroshi Morikawa, a senior strategist at Tokyo-based MU Investments Co., which manages about $14 billion. “That will be a large-scale global trend and will affect household incomes and employment.”

The Nikkei 225 Stock Average dipped 23.09, or 0.3 percent, to close at 7,945.94 in Tokyo, after switching between gains and losses 15 times. The Topix index fell 0.80, or 0.1 percent, to 778.10, with 18 of its 33 industry groups slumping.

The Nikkei fell by a record 42 percent last year as losses and writedowns at global financial companies exceeded $1 trillion, tipping the world’s biggest economies into recession. Japanese companies that have reported third-quarter earnings expect net income will tumble 83 percent in the year to March 31, according to Tokyo-based Shinko Research Institute Co.

Japan’s consumer sentiment stayed near its lowest level in at least 26 years in January, the Cabinet Office reported today, indicating households may keep cutting spending.

Stock Losses

Orix yesterday joined Japan’s biggest banks, including market leader Mitsubishi UFJ Financial Group Inc., in reducing earnings projections on share losses. Orix, which runs leasing and consumer-finance businesses, booked a 62.9 billion-yen ($701 million) write-down on security investments in the third quarter, forcing it to cut its annual profit outlook by 86 percent.

Orix sank 8.9 percent to 3,180 yen, while Japan Steel Works slid 7.5 percent to 887 yen after cutting its profit projection by a fifth. Orix and Japan Steel were the second- and third- biggest losers on the MSCI World Index, after Kobe Steel Ltd.

Kobe Steel plunged 13 percent to 117 yen, its sharpest drop since September 1998, leading steelmakers to the biggest decline among Topix groups. Kobe Steel may have made improper political contributions and its president will step down, the steelmaker said after the market closed. It said during trading that it would make an announcement on a “compliance-related” problem.

T&D jumped 6.8 percent to 2,970 yen, and Tokio Marine Holdings Inc., Japan’s No. 1 non-life insurer, rose 3.4 percent to 2,460 yen. Sumitomo Mitsui Financial Group Inc., Japan’s third-largest listed bank, added 4.4 percent to 3,530 yen.

U.S. Financial Plan

Treasury Secretary Timothy Geithner is scheduled to unveil the White House’s financial-rescue plan at 1 a.m. Tokyo time, preceding a Japanese national holiday. The plan will include fresh injections of funds into banks and may also provide for a so-called bad bank to buy illiquid assets clogging lenders’ balance sheets, officials have said.

“There are expectations in the market the U.S. plan to separate non-performing assets from banks’ balance sheets will turn around the current situation,” said MU Investments’ Morikawa. “Financial shares may shoot up, depending on the plan’s details, but people are wary about betting on either direction.”

Nomura Holdings Inc., Japan’s biggest brokerage, rebounded 3.9 percent to 509 yen. Nomura fell by the most in at least 34 years yesterday as its plan to sell common stock sparked concern ownership will be diluted. Daiwa Securities Group Inc., Japan’s No. 2 brokerage, rose 3.2 percent to 447 yen, paring yesterday’s 3.6 percent drop.

Job Cuts

Nissan, Japan’s third-largest automaker, jumped 7.3 percent to 280 yen. The company will reduce its workforce by 8.5 percent to 215,000 globally by March 2010, the company said yesterday after markets shut. Nissan reversed its profit forecast to a net loss of 265 billion yen for the year to March 31 as demand wanes and a stronger yen cripples earnings.

Nissan “is reacting quickly to the crisis,” Shinya Naruse, an analyst at Nomura Securities Co., wrote in a report today. “The labor-cost cutting and overseas production shift show the company is moving toward improving profitability.” Naruse raised his rating on the company to “neutral” from “reduce.”

Nikkei futures expiring in March rose 0.5 percent to 7,950 in Osaka and advanced 0.3 percent to 7,965 in Singapore.

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