Japanese stocks declining

Japanese stocks declined, paced by exporters including Canon Inc. after the yen strengthened against the dollar and euro.

The Japanese currency weakened against the dollar for a fifth consecutive day yesterday and dropped during the past four days against the euro. It rose as much as 123.17 to the dollar and 167.72 per euro today in Tokyo trading.

``The pause in the yen's weakening has prompted selling of exporters today,'' said Soichiro Monji, who helps oversee $47 billion at Daiwa SB Investments Ltd. in Tokyo. ``It's difficult to continue buying their shares as the sales outlook is not strong.''

Property stocks dropped for a third day on concern higher borrowing costs will erode profits. Japan's five-year bond yields climbed to the highest in almost four weeks.

Trading companies such as Mitsubishi Corp. rose as investors bet they will continue to benefit from rising demand in global markets. Goldman, Sachs & Co. raised its share-price forecast for Japan's five largest trading houses.

The Nikkei fell 9.31, or 0.1 percent, to 18,252.67. The broader Topix index lost 3.03, or 0.2 percent, to 1789.20.

Canon, the world's biggest digital camera maker, dropped 70 yen, or 1 percent, to 7,120. Toyota Motor Corp., the world's No. 1 automaker by market value, declined 40 yen, or 0.5 percent, to 7,790. Honda Motor Co., Japan's second-biggest carmaker by sales, lost 30 yen, or 0.7 percent, to 4,530.

Japan's currency strengthened to 123.43 per dollar from 123.65 at yesterday's close of stocks trading in Tokyo, gaining to as much as 123.17 earlier. It rose to 167.85 per euro from 168.42.

Yen's Gain

A stronger Japanese currency will reduce the value of exporters' overseas sales and make their products less competitive.

``The yen may not have a further steep drop as investors wait for the central bank's monetary decision after Japan's Upper House election,'' said Yoshihisa Okamoto, a fund manager at Mizuho Asset Management Co.

The Topix Real Estate Index dropped 1.4 percent, the worst performer among the 33 industry groups in the broad measure.

Mitsubishi Estate Co., the nation's second-largest property developer by sales, slid 50 yen, or 1.5 percent, to 3,290. Sumitomo Realty & Development Co., the third largest, fell 40 yen, or 1 percent, to 3,950.

The yield on Japan's benchmark five-year note reached 1.565 percent, the highest since June 14. The yield on the benchmark 10-year bond rose to 1.96 percent, a level not seen since June 13.

Continue to Fall?

``Given that the 10-year bond yield is approaching a 2 percent level, I project real estate companies will continue to fall,'' said Daiwa SB's Monji. ``The bullish period for property stocks is over.''

Utility companies such as Tokyo Electric Power Co. and communication stock including NTT DoCoMo Inc. also declined as rising bond yields reduce the appeal of their dividends. The stocks rose in the first three months of this year as investors put money on shares with relatively high payouts.

Tokyo Electric, Asia's biggest generator, fell 40 yen, or 1 percent, to 3,860. NTT DoCoMo, the world's No. 2 mobile-phone company, lost 3,000 yen, or 1.6 percent, to 189,000. Tokyo Electric has an indicated dividend yield of 1.8 percent and NTT DoCoMo has one of 2.5 percent. The 12-month average yield for all companies in the Topix is 1.1 percent.

Mitsubishi Corp., Japan's biggest trading company by market value, advanced 30 yen, or 0.9 percent, to 3,400, near its record high of 3,430 on June 22. Mitsui & Co., the nation's second largest, jumped 50 yen, or 1.9 percent to a record 2,655. Itochu Corp. also climbed to a record, gaining 32 yen, or 2.2 percent, to 1,521.

Higher Price Forecast

Goldman raised its 12-month stock price forecast for five trading companies including Mitsubishi and Mitsui, citing strong profit growth. Japan's trading companies sell industrial fuel and metals and provide plant construction services worldwide.

``Money has continued to flow into companies that are benefiting from increasing global demand and trading houses are among them,'' said Hiroshi Chano, who helps manage $7.3 billion at Yasuda Asset Management Co. in Tokyo.

Isuzu Motors Ltd., Japan's biggest maker of light-duty trucks, advanced 21 yen, or 3.1 percent, to 698, the highest since November 6, 1990. The company may report a record level of operating profit, or sales minus the cost of goods sold and administrative expenses, for the quarter ended June 30, Chikashi Okabe, analyst at Credit Suisse Group in Tokyo said in a report dated yesterday.

Kawasaki Heavy Industries Ltd., which makes aircraft engines, gas turbines and ships, advanced 12 yen, or 2.3 percent, to 525. The Nikkei newspaper said the company will spend about 2 billion yen ($16 million) to double its production capacity of motorcycles in Thailand.

Nikkei futures expiring in September fell 0.1 percent to 18,260 in Osaka and declined 0.1 percent to 18,270 in Singapore.

Canon Inc. (7751 JT)
Honda Motor Co. (7267 JT)
Isuzu Motors Ltd. (7202 JT)
Itochu Corp. (8001 JT)
Kawasaki Heavy Industries Ltd. (7012 JT)
Mitsubishi Corp. (8058 JT)
Mitsubishi Estate Co. (8802 JT)
Mitsui & Co. (8031 JT)
NTT DoCoMo Inc. (9437 JT)
Sumitomo Realty & Development Co. (8830 JT)
Tokyo Electric Power Co. (9501 JT)
Toyota Motor Corp. (7203 JT)

source:bloomberg.com