Japanese Stocks Slip as Fed Bond Purchase Prompts Dollar Drop

By Patrick Rial

March 19 (Bloomberg) -- Japanese stocks fell, paring a weekly jump, after the U.S. Federal Reserve’s pledge to buy $1 trillion in bonds sparked a sell-off of the dollar, crimping earnings at carmakers.

Honda Motor Co., which gets more than half its sales in North America, lost 3.5 percent. Casio Computer Co. plunged 14 percent after forecasting its first loss in seven years. Sumitomo Mitsui Financial Group Inc. added 2.7 percent, leading gains by banks, on speculation central bank operations will help restore credit markets.

The Nikkei 225 Stock Average lost 49.28, or 0.6 percent, to 7,922.89, at the 11 a.m. break in Tokyo, reversing a 0.8 percent advance. The broader Topix index slipped 0.90, or 0.1 percent, to 763.77.

“The move boosted confidence the Fed will be able to check the recession,” said Tomomi Yamashita, a fund manager at Shinkin Asset Management Co. in Tokyo, which oversees about $5.5 billion. “But on a net basis, it’s negative because of the fear that confidence in the dollar could collapse.”

The Nikkei has climbed 4.7 percent this week, while the Topix jumped 5.5 percent, its best performance in 2009. Japan’s markets will be closed tomorrow for a holiday.

In New York, the Standard & Poor’s 500 Index reversed declines to advance 2.1 percent after the Fed’s announcement, bringing the gauge’s rally from March 9 to 17 percent.

Fed Purchases

The Federal Reserve said it will purchase $300 billion in Treasury securities and an additional $750 billion of mortgage securities. The central bank will use newly created money to make the purchases, increasing the supply of funds in the market and helping to drive down rates.

The dollar tumbled to as low as 95.67 yen today from 98.51 at the close of market trading yesterday in Tokyo. A weaker dollar reduces the profitability of revenue generated abroad for Japan’s exporters.

Honda, Japan’s No. 2 automaker, fell 3.5 percent to 2,220 yen. Mazda Motor Corp., which exports about 80 percent of its production, slumped 3 percent to 164 yen. Fujitsu Ltd., the country’s second-biggest personal computer maker, declined 6.5 percent to 348 yen.

Sumitomo Mitsui, the third-largest listed bank, added 2.7 percent to 3,450 yen. Property insurer Aioi Insurance Co. gained 6.8 percent to 392 yen.

Casio, the maker of G-Shock watches and Exilim cameras, plunged by its daily limit of 100 yen, or 14 percent, to 640 yen. The company said it will likely swing to a loss for the first time in seven years this year, prompting Goldman Sachs Group Inc. and Nomura Holdings Inc. to downgrade the shares.

Gold Rallies

Mitsui Mining & Smelting Co. fell 2 percent to 151 yen. Japan’s biggest zinc smelter canceled its dividend and doubled its full-year net loss forecast to 72 billion yen, citing higher depreciation and tax-related costs.

Sumitomo Metal Mining Co., Japan’s biggest gold producer, surged 6.1 to 955 yen. The price of gold rallied as much as 5.9 percent in late trading amid concern the Fed will debase the dollar by increasing the money supply.

To contact the reporter for this story: Patrick Rial in Tokyo at prial@bloomberg.net.