By Patrick Rial Dec. 17 (Bloomberg) -- Most Japanese stocks fell on concern the global recession will force carmakers to cut profit forecasts further and as the dollar slumped following the Federal Reserve’s decision to slash interest rates to zero. Honda Motor Co. fell 5.2 percent after a newspaper said the carmaker will cut its earnings forecast and the dollar traded near a 13-year low. Toyota Motor Corp. sank 2.2 percent after Nikko Citigroup Ltd. lowered its profit target for next year. Mitsubishi Estate Co., Japan’s largest developer by market value, climbed 7.7 percent as traders increased bets the Bank of Japan will follow the Fed in cutting rates. The Nikkei 225 Stock Average lost 7, or 0.1 percent, to 8,561.02 as of 1:21 p.m. in Tokyo, reversing a gain of as much as 2 percent. The broader Topix index was little changed at 828.26, with almost two shares falling for each that rose. The Standard & Poor’s 500 Index surged 5.1 percent yesterday, the steepest gain in four weeks. S&P futures dropped 1.1 percent in trading today. “There is continuous pressure for the yen to get stronger,” said Yuuki Sakurai, general manager of investment planning in Tokyo at Fukoku Mutual Life, which manages $54 billion in assets. The Fed rate cut “provides some breathing room for the troubled economy, but it’s not the kind move that will re-energize the system.” Honda, Toyota The Fed cut its target rate for overnight loans between banks to a range of zero to 0.25 percent, a record low. The central bank also said it will “employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability.” The yen rose to as much as 88.60 against the dollar, near the highest level in 13-years. A stronger yen reduces the value of sales generated overseas. “The S&P futures kicked off the declines, as investors are more and more worried that the deficits produced by all of the U.S. fiscal actions are going to overwhelm the market,” said Hiroaki Kuramochi, head of equities at Tokai Tokyo Securities Co. in Tokyo. “That sent the dollar a bit lower and sparked selling of technology and auto exporters.” Honda, which gets more than half its sales in North America, lost 6 percent to 1,855 yen. Its operating profit will total about 300 billion yen ($3.31 billion) for the year ending March 31, 200 billion yen less than its October forecast, the Nikkei newspaper reported. Honda said it will hold a press conference at 3 p.m. today. Toyota declined 2 percent to 2,950 yen. Nikko Citigroup analyst Noriyuki Matsushima slashed his operating profit forecast for Toyota for the year ending in March 2010 by 1.12 trillion yen ($12.6 billion), as sales are expected to decline and the strong yen squeezes profit margins. BOJ Rates “The zero-rate policy and recessionary economy means selling of the dollar will continue, making it more painful to hold onto exporters, especially the automakers,” said Hiroaki Osakabe, a Tokyo-based fund manager at Chiba-Gin Asset Management Co., which oversees the equivalent of about $1 billion. Mitsubishi Estate gained 8.5 percent to 1,430 yen. Tokyu Land Corp., a developer with property concentrated in western Tokyo, rose 5.7 percent to 352 yen. Investors saw a 40 percent chance the Bank of Japan will reduce its benchmark interest rate from 0.3 percent at this week’s meeting, according to calculations made by JPMorgan Chase & Co. based on interest-rate swaps trading. Bankruptcies in Japan’s real estate sector have surged this year as housing demand slumped while banks reined in lending. To contact the reporters for this story: Patrick Rial in Tokyo at prial@bloomberg.net.

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