Japanese Stocks Fall, Dragging Nikkei 225 to Close Below 10,000

By Masaki Kondo

Oct. 1 (Bloomberg) -- Japanese stocks fell, dragging the Nikkei 225 Stock Average below 10,000 for the first time in two months, after reports showed companies planned to further cut spending and U.S. businesses reduced more jobs than estimated.

Fanuc Ltd., Japan’s biggest maker of robots, fell 3.1 percent after the central bank’s Tankan report showed companies will cut capital spending by more than a 10th this year. Canon Inc., which gets 28 percent of its sales from the Americas, lost 2.8 percent on concern companies may miss earnings forecasts because of a stronger-than-expected yen. Mitsubishi UFJ Financial Group Inc. slid 5.4 percent after saying it will write down its stake in its consumer-lending unit.

The Nikkei 225 declined 1.5 percent to 9,978.64 in Tokyo, its first close below 10,000 since July 24. The broader Topix index fell 1.5 percent to 896.12, with more than five stocks dropping for each that advanced.

“The current business climate is hardly enticing companies to invest,” said Yoshinori Nagano, a senior strategist in Tokyo at Daiwa Asset Management Co., which oversees the equivalent of $96 billion. “The economy is not in good shape yet and consumer spending is unlikely to stage a rapid recovery.”

Yesterday, the Nikkei 225 and Topix capped their first monthly drop since February as concern mounted that Japan’s newly installed administration will fail to accelerate an economic recovery. Topix-listed shares trade at 38.3 times estimated net income for this year, the lowest level since April 29, according to data compiled by Bloomberg.

Reduced Capital Spending

U.S. companies cut payrolls by 254,000 jobs last month, ADP Employer Services said yesterday, more than economists had estimated.

Fanuc dived 3.1 percent to 7,800 yen, and Kawasaki Heavy Industries Ltd., the maker of Japan’s first industrial robots, dropped 4 percent to 219 yen.

Japanese large enterprises plan to cut capital spending by 10.8 percent this year, more than the 9.4 percent reduction foreseen three months ago, according to the Bank of Japan’s quarterly Tankan survey released this morning. Economists had estimated a 9 percent decrease.

Canon, the world’s biggest maker of digital cameras, fell 2.8 percent to 3,530 yen. Sony Corp., which gets 23 percent of its sales from the U.S., lost 2.8 percent 2,580 yen.

Japan’s large manufacturers expect the yen to trade at 94.08 per dollar in the second half, according to the Tankan, while the yen appreciated to as much as 89.66 today.

Crumbling Expectations

“The Tankan report confirmed that most companies haven’t yet taken the negative effects of the strong yen into account,” said Naoki Fujiwara, chief fund manager at Shinkin Asset Management Co., which oversees the equivalent of $4 billion. “Expectations that businesses will lift their annual forecasts when reporting their first-half results are falling apart.”

Electronics makers as a group were the second-biggest drag on the Topix, following banks.

Mitsubishi UFJ, Japan’s largest listed bank, dropped 5.4 percent to 456 yen and was the most actively traded share by value in Japan. The bank will take a 28 billion-yen charge on its stake in Acom Co., Mitsubishi UFJ said yesterday. The bank boosted its investment in the consumer lender to 40 percent last year, and Acom’s shares have plunged by half in the past six months.

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