Japan Stocks Fall as Earnings Slump Signals Prolonged Recession

By Masaki Kondo

Feb. 2 (Bloomberg) -- Japanese stocks dropped after Hitachi Ltd., Fujitsu Ltd. and NEC Corp. reversed their profit forecasts to losses, indicating the nation’s economic slump is deepening.

Hitachi, the world’s third-largest maker of hard-disk drives, plunged, 17 percent. NEC dropped almost 7 percent. Fujitsu, Japan’s biggest computer-service provider, declined 4.1 percent. Mizuho Financial Group Inc., the nation’s second- largest listed bank, retreated 4.9 percent after posting its second quarterly loss in a row.

“We’ll likely continue to see a series of downward earnings revisions from companies and analysts,” Tomochika Kitaoka, a Tokyo-based strategist at Mizuho Securities Co., said in an interview with Bloomberg Television. “With more companies cutting dividends, domestic investors will likely shy away from the equity market.”

The Nikkei 225 Stock Average declined 153.27, or 1.9 percent, to 7,840.78 as of 9:29 a.m. in Tokyo. The broader Topix index fell 15.77, or 2 percent, to 778.26, with almost four stocks slumping for each that rose.

The Nikkei lost a record 42 percent last year and anther 9.8 percent in January, the steepest monthly decline since October, as Japanese companies from car manufacturers to electronics makers have cut their full-year earnings outlooks. Domestic businesses reporting their third-quarter earnings have posted an 85 percent tumble in net income for the quarter, Tokyo-based Shinko Research Institute Co. said in a report dated Jan. 30.

NEC Retreats

Hitachi dropped 6.7 percent to 294 yen, headed for the lowest close since December 1980, after reversing its profit forecast on Jan. 30 to a record net loss of 700 billion yen ($7.81 billion) for the year ending March 31. Demand in the automobile, semiconductor and industrial-equipment industries was declining “rapidly,” the company said.

NEC, Japan’s biggest personal computer maker, retreated 6.9 percent to 228 yen after worsening earnings prospects prompted the company to announce it would cut more than 20,000 workers by March 2010. Fujitsu, the nation’s largest computer-service provider, sank 4.1 percent to 395 yen after projecting its first net loss since the fiscal year ended March 2003.

Panasonic Corp., the world’s largest maker of consumer electronics, dived 4.6 percent to 1,048 yen. The company may report a 350 billion yen net loss for this business year, the Yomiuri newspaper reported yesterday. The median of analyst estimates compiled by Bloomberg projected 6 billion yen in profit.

Sharp Corp., Japan’s largest maker of liquid-crystal displays, lost 3.8 percent to 651 yen. The company will probably report a full-year net loss for the first time since becoming a publicly traded company in 1956, the Asahi newspaper reported on Jan. 31.

Mizuho slid 4.9 percent to 216 yen. The bank posted a quarterly net loss in the three months ended Dec. 31 after writing down the value of its stockholdings and non-performing loans swelled.

Nikkei futures expiring in March retreated 1.4 percent to 7,830 in Osaka and by the same degree to 7,840 in Singapore.

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