Japanese Shares Slump, Led by Insurers, on Financial Concern

By Masaki Kondo

March 31 (Bloomberg) -- Japanese stocks fell for a third day, sending the Topix Index to its worst fiscal year on record, as swelling unemployment rekindled concern a deepening recession will hurt corporate earnings.

Tokio Marine Holdings Inc., the nation’s biggest casualty insurer, slumped 5.9 percent even as Prime Minister Taro Aso prepared to unveil a new package to stimulate an economy where unemployment has surged to a three-year high. Mitsui Fudosan Co., Japan’s No. 1 property developer, sank 4 percent, after housing starts tumbled. Mizuho Financial Group Inc. dived 4.6 percent after declining to exercise a call option on its perpetual subordinated bonds to preserve capital.

“There’s no room for relief for Japan’s employment prospects as businesses will fire more workers to reduce their production capacity,” said Hiroshi Morikawa, a senior strategist at MU Investments Co., which manages about $14 billion. “The current government’s days may be numbered and nobody knows who will implement Aso’s stimulus ideas.”

The Nikkei 225 Stock Average slid 126.55, or 1.5 percent, to close at 8,109.53 in Tokyo after swinging between losses and gains at least six times. The broader Topix index dropped 15.88, or 2 percent, to 773.66. The Nikkei gained 7.2 percent in March, the biggest monthly climb since April last year, while the Topix added 2.2 percent.

Today is the last day of Japan’s fiscal 2008. The Nikkei has lost 35 percent, the most since the year ended March 2001, on concern government measures to revive growth will fail as companies from Sony Corp. to Toyota Motor Corp. are cutting jobs. The Topix has fallen 36 percent, the steepest plunge on record going back to 1969.

Rising Unemployment

The nation’s jobless rate jumped to 4.4 percent last month, the statistics bureau today said, while a separate government report showed household spending fell for a 12th month. Aso will explain his newest economic stimulus package at a 5 p.m. press conference, Chief Cabinet Secretary Takeo Kawamura said.

Tokio Marine slid 5.9 percent to 2,395 yen, while Orix Corp., Japan’s biggest non-bank financial company, dived 7 percent to 3,170 yen. Nomura Holdings Inc., Japan’s largest securities firm, retreated 5.5 percent to 495 yen. Insurers, non-bank financial companies and brokerages were the biggest losers among 33 industry groups on the Topix.

In New York, the Standard & Poor’s 500 Index sank 3.5 percent, the most since March 5, led by financial shares. Treasury Secretary Timothy Geithner said on March 29 that some banks are going to need large amounts of government aid.

Housing Slump

“More substantially bad news is expected from the U.S. financial system and the Tokyo market is reflecting that,” said Jun Nishizaki, who oversees the equivalent of $250 million in Japanese equities at Nissay Asset Management Corp. “Investors are concerned more real-estate companies will fail.”

Mitsui Fudosan slipped 4 percent to 1,067 yen. Its smaller rival Mitsubishi Estate Co. retreated 2.7 percent to 1,102 yen. Sumitomo Realty & Development Co. sank 3.2 percent to 1,083 yen.

February housing starts in Japan tumbled by a quarter from a year earlier, according to a report released today from the Ministry of Land, Infrastructure and Transport. That’s more than a 19 percent drop in January.

Mizuho, which reported its second-straight quarterly loss in January, sank 4.6 percent to 188 yen. The bank, the nation’s No. 2 listed lender, yesterday said it won’t redeem $1.5 billion of perpetual subordinated bonds that will become callable in April.

“The decision clearly took the credit markets by surprise,” Philippa Rogers and Toyoki Sameshima, analysts for Goldman Sachs Group Inc., wrote in a note today. “Mizuho is amongst the weakest of the Japanese banks in both quantity and quality of capital.”

Nikkei futures expiring in June dipped 1 percent to 8,120 in Osaka and fell 1 percent to 8,130 in Singapore.

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