Nikkei 225 Falls for First Time in Four Days as Yen Strengthens

By Kana Nishizawa and Satoshi Kawano

Jan. 7 (Bloomberg) -- Japan’s Nikkei 225 Stock Average fell for the first time in four days on concern the strengthening yen will crimp profits at makers of cars and electronics, and as brokerages cut investment ratings on Canon Inc. and Terumo Corp.

Toyota Motor Corp., the world’s biggest carmaker and which generates 31 percent of sales in North America, lost 1.3 percent after the yen gained against the dollar. Canon, which is the world’s largest camera maker and gets 79 percent of revenue abroad, sank 2.5 percent after Credit Suisse Group AG cut its rating. Sumitomo Mitsui Financial Group Inc., Japan’s No. 2 bank by market value, climbed 4.3 percent after saying it plans to sell as much as 889 billion yen ($9.6 billion) in shares.

“Investors are selling exporters as they become cautious of a re-strengthening of the yen,” said Hiroaki Hiwada, a strategist at Tokyo-based Toyo Securities Co. “In preparation for Mitsui Sumitomo’s share sale, foreign investors may be buying the yen.”

The Nikkei fell 0.5 percent to 10,681.66 at the 3 p.m. close of trading in Tokyo, reversing a 0.4 percent gain. The measure lost 0.8 percent in 20 minutes after 1:51 p.m. as the yen strengthened against the dollar.

The broader Topix index rose 0.1 percent to 931.85, with about four stocks advancing for every three that declined. Sumitomo Mitsui climbed 4.3 percent to 2,920 yen, the Topix’s biggest boost. It’s the first time since 1994 that the gauge increased on the first four business days of the year.

Yen Hurts Exporters

The yen strengthened to as much as 92.12 against the dollar this afternoon in Tokyo from 92.46 this morning, cutting the value of overseas sales at Japanese companies when converted into their home currency. It climbed to a 14-year high in November and averaged 93.59 in 2009, the highest annual level since currencies began trading freely in 1971.

The Topix climbed 5.6 percent last year, the lowest return among benchmark indexes of the world’s 40 largest stock markets, as a strong yen hurt exporters’ earnings and on concern the government wouldn’t be able to restore growth. Stocks in the index trade at an average of 1.1 times book value, compared with 2.3 times for the Standard & Poor’s 500 Index in the U.S. and 1.7 times for the Dow Jones Stoxx 600 Index in Europe.

Toyota lost 1.3 percent to 3,850 yen, and Honda Motor Co., Japan’s second-largest carmaker, sank 1.6 percent to 3,090 yen. Canon fell 2.5 percent to 3,930 yen after Credit Suisse cut its rating on the camera maker to “neutral” from “outperform.” Toyota, Canon and Honda were the biggest drags on the Topix.

Fanuc, Terumo Drop

Fanuc Ltd., a maker of industrial robots that gets almost 70 percent of revenue overseas, retreated 2.3 percent to 8,540 yen. Terumo Corp., Asia’s biggest maker of medical equipment, dropped 2.8 percent to 5,270 yen after Bank of America Corp.’s Merrill Lynch & Co. unit reduced its rating to “neutral” from “buy.” They were the largest drags on the Nikkei 225.

Japan Airlines Corp. fell the most in a week after Nikkei news said the carrier may take a 1.13 trillion-yen charge in the year ending March and file for bankruptcy. The stock dropped 9.5 percent to 76 yen, the steepest decline in the Nikkei 225.

The Nikkei 225 gained 13 percent in December, its steepest monthly gain since July 1995. The S&P 500 added 1.8 percent for the same month, while the Stoxx rose 6.2 percent.

“The market is overheating after the recent rally,” said Mitsushige Akino, who manages the equivalent of $450 million at Tokyo-based Ichiyoshi Investment Management Co.

To contact the reporters for this story: Kana Nishizawa in Tokyo at knishizawa5@bloomberg.net; Satoshi Kawano in Tokyo at skawano1@bloomberg.net.