Japanese Stocks Decline on Slower Economic Growth, Stronger Yen

By Masaki Kondo

Sept. 11 (Bloomberg) -- Japanese stocks declined, led by car manufacturers and steelmakers, after the nation’s economy grew less than estimated in the second quarter and the dollar weakened against the yen.

Toyota Motor Corp., which gets 31 percent of its revenue in North America, slid 1.8 percent. Nippon Steel Corp., the world’s No. 2 maker of the alloy, fell 2.3 percent on concern the incoming government’s proposals to cut greenhouse gases will raise production costs. Haseko Corp., a condominium builder, tumbled 22 percent after saying it will sell convertible bonds.

“It has yet to be seen if the global economy will be able to stand on its own legs after the effects of inflated fiscal and monetary supports fade away,” said Hiroshi Morikawa, a senior strategist at MU Investments Co., which manages the equivalent of $14 billion in Tokyo.

The Nikkei 225 Stock Average lost 0.7 percent to close at 10,444.33 in Tokyo. The broader Topix index fell 0.8 percent to 950.41 after changing direction 13 times. This week, the Nikkei advanced 2.5 percent, and the Topix added 1.6 percent.

The Nikkei climbed for a sixth-straight month in August, the longest stretch of increases since the nine months ended January 2006, as stimulus measures globally propped up demand and company earnings. Stocks on the gauge trade at 6.8 times estimated cash flow, lower than 9.4 times for the Standard & Poor’s 500 Index, according to data compiled by Bloomberg.

Japan’s economy expanded at an annual 2.3 percent pace in the three months ended June 30, the Cabinet Office said in Tokyo. Economists surveyed by Bloomberg News had forecast a 3.7 percent expansion, unchanged from the preliminary report.

Stronger Yen

Toyota, the world’s biggest carmaker, dived 1.8 percent to 3,840 yen and was the most actively traded stock by value. Closest domestic rival Honda Motor Co. lost 2.1 percent to 2,865 yen. Automakers as a group were the biggest drag on the Topix.

The yen appreciated to as much as 91.17 against the dollar before stock trading finished in Tokyo today, a level not seen since Feb. 13. A stronger yen reduces the value of overseas sales at Japanese companies when converted into their home currency.

“There are likely investors looking at the recent trend of the yen and imagining it continuing past 90,” said Tomomi Yamashita, a Tokyo-based fund manager at Shinkin Asset Management Co., which oversees about $5.5 billion. “They want to sell stocks while they still can.”

Nippon Steel lost 2.3 percent to 348 yen, and Daido Steel Co. slipped 2.7 percent to 358 yen. Yukio Hatoyama, whose Democratic Party of Japan won the national election by a landslide last month, pledged on Sept. 7 to cut Japan’s greenhouse-gas emissions 25 percent by 2020 from 1990 levels.

‘Huge’ Costs

Once enacted, the proposal will add “huge” costs to Japanese steelmakers as companies may have to take such measures as lowering production or buying carbon credits, Rajeev Das and Tomofumi Noguchi, analysts at Goldman Sachs Group Inc., wrote in a report yesterday.

Haseko tumbled 22 percent to 94 yen, the steepest plunge since August 2002 and the biggest loser on the Topix. The company yesterday said it will sell 15 billion yen ($165 million) of convertible bonds, prompting Credit Suisse Group AG to downgrade the stock to “neutral” from “outperform.”

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