By Masaki Kondo Dec. 16 (Bloomberg) -- Japan stocks slumped as prospects for a prolonged recession dimmed the earnings outlook for manufacturers and commodities producers. Nippon Steel Corp. and JFE Holdings Inc., Japan’s largest steelmakers, slumped more than 3 percent on a newspaper report Toyota Motor Corp. will ask for price cuts. Oil explorer Inpex Corp. sank 4.8 percent after crude fell for a second day. Sony Corp. retreated 5.4 percent after Credit Suisse Group more than halved its price estimate, saying the electronics maker has been slow to react to the economic slowdown. The Nikkei 225 Stock Average declined 55.61, or 0.6 percent, to 8,609.05 as of 12:40 p.m. in Tokyo, retreating from yesterday’s 5.2 percent surge. The broader Topix index fell 11.99, or 1.4 percent, to 834.94. The Nikkei has tumbled 44 percent in 2008, set for its worst year ever, as Japan succumbed to a worldwide recession and the yen rose 20 percent versus the dollar. “With no improvement in the global economy and the strengthening yen, the earnings outlook for exporters is poor,” said Naoki Fujiwara, chief fund manager at Tokyo-based Shinkin Asset Management Co., which manages the equivalent of $6.1 billion. Shares in resource-related companies “can’t escape being affected by the volatile commodity market.” Japan’s biggest manufactures expect pretax profit to drop by a quarter this fiscal year, the Bank of Japan’s quarterly Tankan survey showed yesterday. Stocks included in the Nikkei trade at 15 times estimated earnings for the next fiscal year, making them pricier than U.S. and European counterparts, which trade at 13 times and 8.6 times respectively. Price Cuts Toyota may ask steelmakers including Nippon Steel to reduce prices on steel sheets used to make cars to about 70,000 yen ($773) a ton from more than 100,000 yen, the Nikkei newspaper reported today, without citing anyone. The two companies will start negotiations in January, the newspaper said. Nippon Steel lost 3.7 percent to 285 yen, while JFE fell 5.1 percent to 2,420 yen. Tokyo Steel Manufacturing Co. dropped 4.5 percent to 855 and Daido Steel Co. sank 4.4 percent to 295. Inpex, Japan’s largest oil and gas explorer, declined 4.8 percent to 620,000 yen, while rival Japan Petroleum Exploration Co. dropped 3.4 percent to 3,670 yen. Crude oil for January delivery extended its slump to a second session yesterday, retreating 3.8 percent to settle at $44.51 a barrel in New York. The contract rebounded as much as 1.2 percent today. Necessary Changes Sony sank 5.4 percent to 1,835 yen, erasing yesterday’s gain. Credit Suisse cut its investment rating on Sony to “underperform” and slashed its 12-month price estimate on the stock by 59 percent to 1,000 yen, saying the company needs fundamental changes in its business to catch up with Apple Inc. and Nintendo Co. “There is now a need for a further business restructuring plan, including some possible changes to management,” Credit Suisse analyst Koya Tabata wrote in a note dated yesterday. Asahi Glass Co., Asia’s largest glassmaker, retreated 3.2 percent to 488 yen, and Nippon Electric Glass Co. slumped 4.4 percent to 495 yen. UBS AG yesterday cut its ratings on the companies to “sell” from “neutral,” citing falling prices for glass supplied to makers of liquid-crystal displays. Nikkei futures expiring in March dipped 0.2 percent to 8,610 in Osaka and slumped 0.4 percent to 8,615 in Singapore. To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

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