BLBG: Japan Stocks Decline on Earnings Outlook; Citizen, Canon Slump
By Masaki Kondo and Patrick Rial
Nov. 11 (Bloomberg) -- Japanese stocks dropped on concern slumping demand and the stronger local currency will force companies to lower earnings forecasts.
Citizen Holdings Co., the world's biggest maker of mechanical watches by volume, sank 9.5 percent after cutting its profit target by a third. Canon Inc., which last month predicted its first profit drop in nine years, retreated 8.4 percent. JTEKT Corp., an electronic-equipment maker part owned by Toyota Motor Corp., lost 10 percent after orders for machine tools plunged the most in more than six years.
``We've got the financial crisis on the one hand, but now focus has shifted to the economy,'' said Hiroyasu Ito, a Tokyo- based fund manager at Dai-ichi Mutual Life Insurance Co., which holds $296 billion in assets. ``The speed and violence at which the economy has deteriorated is the reason there's no sense of calm in the stock market.''
The Nikkei 225 Stock Average declined 272.13, or 3 percent, to close at 8,809.30 in Tokyo. The broader Topix index fell 27.29, or 3 percent, to 889.36, with all but one of its 33 industry groups falling. The value of shares traded on the Tokyo exchange was the lowest since Sept. 1.
A slowdown in sales in the U.S. and Europe is dimming the earnings outlook for Japanese companies, prompting businesses from Toyota to Sony Corp. to slash forecasts. Of 922 companies that have reported first-half earnings through Nov. 10, more than half reduced full-year profit targets, according to a report by Shinko Research Institute Co.
Weakening demand drove down Japan's current-account surplus for a seventh month in September, the Ministry of Finance said today. The slowdown at home and abroad has spurred a 42 percent drop in the Nikkei this year.
Corporate earnings won't likely turn the corner until the second half of fiscal 2010 at the earliest, Shinichi Ichikawa, chief equity strategist at Credit Suisse Group, wrote in a report yesterday. He extended his 2008 pretax-profit decline estimate for Japanese companies to 40 percent from 30 percent.
Nikkei futures expiring in December retreated 3.7 percent to 8,780 in Osaka and slumped 3.6 percent to 8,780 in Singapore.
To contact the reporters for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net; Patrick Rial in Tokyo at prial@bloomberg.net.
