Japanese Stocks Fall on Bad-Loan Concern; Inpex Climbs on Oil

By Masaki Kondo

Feb. 20 (Bloomberg) -- Japanese stocks fell on concern rising bad-loan costs will hurt profits at financial companies, outweighing gains by commodity shares after oil surged.

Mizuho Financial Group Inc., Japan’s No. 2 listed bank, slid 2 percent after Goldman Sachs Group Inc. said rising credit-card defaults may reduce U.S. issuers’ earnings. Bridgestone Corp., the world’s biggest tiremaker, slumped 6.3 percent after saying profit will fall 71 percent this year. Inpex Corp., Japan’s largest oil explorer, climbed 2.8 percent after crude soared the most in seven weeks.

The Nikkei 225 Stock Average declined 43.13, or 0.6 percent, to 7,514.52 as of 9:39 a.m. in Tokyo. The broader Topix index fell 0.74, or 0.1 percent, to 750.85. In New York, the Dow Jones Industrial Average dropped to the lowest close since October 2002, while the Standard & Poor’s 500 Financials Index retreated to the lowest level since January 1995.

“Though stocks here will unavoidably fall after the slump in the U.S. market, the drop won’t be very big,” Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages $53 billion, said in an interview with Bloomberg Television. “Resource shares will be resilient after the jump in oil prices.”

The Nikkei dropped 3.4 percent this week, while the Topix lost 1.8 percent. The Nikkei has slumped 15 percent this year as government and central bank measures to revive growth failed to restore confidence in the financial system and quell concern that the global recession will deepen.

Rising Bankruptcies

Credit-card defaults may peak at 11 percent of loans by the end of this year, Goldman Sachs analyst Brian Foran said in an e-mail, cutting his 2009 earnings estimate for card issuer American Express Co. by almost 40 percent. Earlier this month, Fitch Ratings said loan failures climbed to 7.5 percent, the highest level since 2005.

Mizuho retreated 2 percent to 192 yen, while bigger rival Mitsubishi UFJ Financial Group Inc. dropped 1.4 percent to 433 yen. Shinsei Bank Ltd., the Japanese lender part-owned by private-equity investor Christopher Flowers, slumped 6.5 percent to 87 yen, poised for a 20 percent tumble for this week.

Amid rising bankruptcies, the Bank of Japan yesterday said it will buy corporate bonds for the first time to stem a shortage of credit. The announcement came as Tokyo-based Aomi Construction Co. said it filed for bankruptcy protection because of a customer’s failure.

With banks tightening lending, bankruptcies among Japan’s listed companies reached 33 last year, an annual postwar record, according to Tokyo Shoko Research Ltd. Nine more companies have gone bust this year, with six of them in real estate and construction industries.

Tires, Oil

Bridgestone sank 6.3 percent to 1,266 yen, driving its peers to the biggest drop among 33 industry groups on the Topix. The company yesterday said net income will probably fall 71 percent to 3 billion yen ($32 million) this year as demand for new cars wanes.

Inpex gained 2.8 percent to 673,000 yen. Crude oil for March delivery soared 14 percent to $39.48 a barrel in New York after a U.S. government report showed an unexpected decline in inventories. A measure of six primary metals traded in London rose 1.5 percent.

Nikkei futures expiring in March retreated 0.9 percent to 7,500 in Osaka and Singapore.

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