Japanese Stocks Drop on Yen, Metals; Mitsubishi Motors Rises

By Masaki Kondo

June 18 (Bloomberg) -- Japanese stocks fell for the third time in four days as the local currency strengthened to a two- week high, diminishing the earnings prospects for makers of cars and electronics.

Honda Motor Co., which gets more than half its sales in North America, dropped 3.7 percent, while electronics maker Sony Corp. declined 2.9 percent. Mitsubishi Corp., a trading company that gets more than half its profit from commodities, slid 5 percent as metals prices had the longest streak of losses in a half year. Mitsubishi Motors Corp. added 1.1 percent on a newspaper report it plans to develop a cheaper electric vehicle.

“Optimism that the yen will weaken to beyond 100 is evaporating,” said Mitsushige Akino, who oversees about $574 million at Ichiyoshi Investment Management Co. in Tokyo. “The economy has clearly hit bottom, but that’s been priced in.”

The Nikkei 225 Stock Average declined 170.04, or 1.7 percent, to 9,670.81 as of 12:40 p.m. in Tokyo. The broader Topix index fell 14.89, or 1.6 percent, to 908.14, with three stocks retreating for each that advanced.

The Nikkei recovered to 10,000 on June 12 for the first time in eight months as improved economic indicators boosted investor confidence in the outlook for equities. Merrill Lynch & Co. said yesterday fewer investors were underweight in Japanese equities this month than in May.

The yen strengthened versus the dollar yesterday to the 95 level for the first time since June 4. The Japanese currency appreciated to as much as 95.52 from 96.16 at the close of stock trading in Tokyo.

Honda, Sony

Honda declined 3.7 percent to 2,575 yen, extending its drop to a sixth day, and Sony, maker of the PlayStation 3 game machine, sank 2.9 percent to 2,480 yen. Electronics makers were the biggest drag on the Topix.

Mitsubishi Corp., Japan’s largest trading house by value, lost 5 percent to 1,779 yen, and closest rival Mitsui & Co. retreated 4.4 percent to 1,130 yen. A gauge of six metals in London fell yesterday for a fourth session, the longest losing streak since a seven-day slump ending Dec. 5.

“After the Nikkei hit 10,000, people’s focus is going back to the patchy state of the global economy,” said Koji Toda, chief fund manager at Resona Bank Ltd. “Investors are taking profit because they know they can’t expect to see a V-shaped economic recovery.”

Mitsubishi Motors advanced 1.1 percent to 183 yen. The automaker plans to develop an electric vehicle priced at 3 million yen ($31,000) by 2012, cheaper than its current model, the Nikkei newspaper said today. Meidensha Corp., which supplies parts for Mitsubishi Motors’ electric cars, added 6.1 percent to 612 yen, extending yesterday’s 16 percent jump.

“Investors feel environment-related shares will stay solid even if the market enters a downward trend,” said Ichiyoshi’s Akino. “As people become more convinced this rally is coming to a close, they are more eager to buy these shares.”

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