Japan Stocks Fall After U.S. Retail Sales Drop, Yen Strengthens

By Patrick Rial

April 15 (Bloomberg) -- Japanese stocks fell for a second day after an unexpected drop in U.S. retail sales and a stronger yen dimmed the profit outlook for makers of electronics and cars.

Canon Inc., the world’s largest seller of digital cameras, declined 2.9 percent. Honda Motor Co., Japan’s second-biggest carmaker, fell 1.8 percent. Tokyo Electron Ltd., the world’s second-largest supplier of semiconductor production equipment, lost 1.7 percent after chipmaker Intel Corp. said profit plunged. Nomura Holdings Inc., Japan’s biggest brokerage, plunged 6 percent after Goldman Sachs Group Inc. sold shares to repay government loans, prompting a sell-off in U.S. financial stocks.

“The situation in the U.S., combined with the stronger yen point to losses in the local market today,” said Hiroichi Nishi, general manager at Nikko Cordial Securities Co., in an interview with Bloomberg Television. “From a technical perspective, investors may be thinking now is a good time to sell.”

The Nikkei 225 Stock Average lost 119.18, or 1.4 percent, to 8,723.50 as of 9:30 a.m. in Tokyo. The broader Topix index retreated 11.38, or 1.4 percent, to 832.04. The Tokyo Stock Exchange’s 25-day Toraku index, a momentum indicator, climbed to 130 yesterday, a reading that signals to some investors that stocks are poised to decline.

The Nikkei remains up 24 percent since dropping to a 26- year low on March 10, buoyed by a proposal for record stimulus spending in Japan, and as signs emerged the global recession is easing.

Canon slid 2.9 percent to 3,020 yen. Olympus Corp., which makes digital cameras and medical equipment such as endoscopes, plunged 5.2 percent to 1,808 yen. Honda retreated 1.8 percent to 2,695 yen.

Yen, Intel

U.S. retail sales fell 1.1 percent in March, the Commerce Department said. Economists forecast a 0.3 percent increase, according to the median estimate in a Bloomberg survey. Auto dealers, electronics stores and restaurants led the decline.

The yen climbed to as high as 98.74 against the dollar from 99.79 at the close of trading in Tokyo yesterday. Japan’s currency gained as much as 2.1 percent versus the euro. A stronger yen erodes the value of sales generated overseas.

Tokyo Electron lost 1.7 percent to 4,060 yen. Toshiba Corp., the world’s second-biggest maker of flash memory chips, retreated 2.7 percent to 326 yen.

Intel, the world’s biggest chipmaker, reported a 55 percent drop in first-quarter profit and falling gross margins, sending the shares 5.1 percent lower in late trading.

Government Funds

Elpida Memory Inc., Japan’s largest computer memory maker, jumped 3.5 percent after public broadcaster NHK said the government may provide funds to the company to bolster capital.

Japan’s financial companies followed declines by U.S. rivals after Goldman Sachs raised capital to pay back government loans and Wachovia Capital Markets LLC said Bank of America Corp. may be forced to raise more funds.

Nomura plunged 6 percent to 608 yen. Daiwa Securities Group Inc., Japan’s second-biggest brokerage, lost 5.7 percent to 517 yen. Shinko Securities Co. sank 7.6 percent to 245 yen, leading declines on the Nikkei.

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