Japan Stocks Drop on End of ‘Clunkers’ Program; Nintendo Falls

By Masaki Kondo

Aug. 21 (Bloomberg) -- Japanese stocks fell, capping their first weekly drop in more than a month, as U.S. plans to close a car-financing program dragged down automakers.

Honda Motor Co., a carmaker that derives almost half its sales from North America, sank 4.1 percent after the U.S. said it will close the “cash for clunkers” program on Aug. 24. Nintendo Co. tumbled to the lowest price in almost three years, coming down to the level before the release of its Wii game machine. Sumitomo Metal Mining Co., Japan’s No. 2 copper smelter, sank 3.4 percent after prices for the metal slid for a sixth day.

The Nikkei 225 Stock Average slid 1.4 percent to close at 10,238.20 in Tokyo. The broader Topix index lost 1.2 percent to 947.34, as more than three stocks slid for each one that rose.

“What matters most is whether the U.S. economy recovers and consumers come back to the car market after the clunkers program ends,” said Masaru Hamasaki, a senior strategist at Toyota Asset Management Co., which oversees the equivalent of $14 billion. “Employment and consumer spending haven’t improved as quickly as people hoped in the U.S. We may not see a positive spiral for a while in which a recovery in demand leads to an increase in output and jobs.”

For the week, the Nikkei dropped 3.4 percent, and the Topix lost 2.7 percent, their first weekly slump since the five days ended July 10.

The Topix has rallied 35 percent from a quarter-century low on March 12. Sixteen percent of the companies in the gauge trade at more than 50 times their estimated net income for this year, three times the level of the Standard & Poor’s 500 Index in the U.S., data compiled by Bloomberg show.

End of Program

The “cash for clunkers” program offers car buyers discounts of as much as $4,500 to trade in older cars and trucks for new, more fuel-efficient vehicles. The program will close on Aug. 24, U.S. Transportation Secretary Ray LaHood said in a statement yesterday, after having recorded transactions valued at $1.9 billion in rebates.

Honda, Japan’s No. 2 carmaker, lost 4.1 percent to 2,955 yen, the steepest dive since July 8. Larger rival Toyota Motor Corp., which has the biggest share of purchases under the clunkers program, lost 2.9 percent to 3,980 yen. Automakers collectively were the biggest losers among the 33 industry groups on the Topix, followed by metal producers, and Toyota and Honda were the heaviest drags on the Topix.

The weakening dollar exacerbated declines by cutting the value of U.S. sales at Japanese companies when converted into their home currency. The dollar depreciated to as much as 93.48 per yen from 94.46 at the close of Tokyo stock trading yesterday.

Nintendo, which counts the Americas as its biggest market by sales, dived 3.2 percent to 23,690 yen in Osaka trading, the lowest close since October 2006. That’s a month before the release of its flagship Wii game machine in the U.S.

Sumitomo Metal lost 3.4 percent to 1,424 yen, while Mitsui Mining & Smelting Co. slid 4.6 percent to 269 yen. Copper retreated 0.6 percent today in its sixth consecutive decline.

Nikkei futures expiring in September fell 0.8 percent to 10,280 in Osaka and lost 0.8 percent to 10,275 in Singapore.

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