Japan’s stocks fell the most in almost two weeks as U.S. home prices sank at the fastest rate in decades and local manufacturers’ confidence dropped by a record. Toyota Motor Corp., Japan’s biggest automaker, fell 4.2 percent after projecting its first operating loss in 71 years. Bridgestone Corp., the world’s largest tiremaker, dived 4.2 percent after cutting its annual earnings target by 82 percent. Fujitsu Ltd. and Daihatsu Motor Co. lost more than 3 percent after saying they will reduce their workforces. Nippon Telegraph & Telephone Corp. lost 4.8 percent ahead of a trading suspension of its shares resulting from the Tokyo bourse’s switch to a paperless stock system. The Nikkei 225 Stock Average retreated 219.30, or 2.5 percent, to 8,504.48 as of 1:00 p.m. in Tokyo, set for the sharpest decline since Dec. 12. The broader Topix index fell 22.06, or 2.6 percent, to 826.66. Stocks in Japan resumed trading today after a holiday yesterday. “The fate of the auto industry has a huge influence on investor sentiment, because it involves a wide range of supporting sectors,” said Hideyuki Ookoshi, who helps oversee about $365 million at Tokyo-based Chiba-Gin Asset Management Co. “Toyota may not turn around even in the next business year.” Writedowns and credit losses at financial companies have swelled to $1 trillion globally as falling home prices in the U.S. reduced the value of securities backed by loan and mortgage payments. The bleak economic outlook has discouraged consumers worldwide from buying Japanese-made cars and electronics, causing a reading of sentiment among large domestic manufacturers to fall the most since the survey began in 2004, according to a report from Japan’s Cabinet Office and Finance Ministry. Home Prices The median resale price of U.S. houses dropped 13 percent last month, the most since the tally started in 1968 and likely the steepest plunge since the 1930s, the National Association of Realtors said yesterday. A separate report from the Commerce Department showed sales of new homes fell to a 17-year low in November. Toyota lost 4.2 percent to 2,775 yen. The company said on Dec. 22 it will post a 150 billion yen ($1.66 billion) operating loss in the year to March 31, reversing its forecast for a 600 billion-yen profit. The company’s expected loss may prompt President Katsuaki Watanabe to step down next year, people familiar with the matter said. Bridgestone dived 4.2 percent to 1,232 yen, after slashing its net income forecast on Dec. 22. Its closest domestic rival Yokohama Rubber Co. sank 5.8 percent to 421 yen. A gauge of rubber-product makers posted the second-steepest decline among the 33 industry groups on the Topix. Job Cuts Denso Corp., the world’s largest listed auto-parts maker, slid 3.3 percent to 1,334 yen. The company, part owned by Toyota, lowered its full-year earnings target for a third time this year, saying net income will probably amount to a 10th of its forecast because of falling demand from carmakers. To cut costs amid the global slump in demand, Japanese manufacturers are shrinking production and firing workers, prompting Prime Minister Taro Aso to introduce a series of stimulus plans. Measures include financial assistance to households and tax cuts. Government spending will jump to a record next year, according to a budget proposal released by the Finance Ministry on Dec. 20. Fujitsu, Japan’s biggest software-services company, sagged 3.3 percent to 442 yen, while Daihatsu, the nation’s largest minicar maker, lost 5.5 percent to 761 yen. Fujitsu fired 400 workers, while Daihatsu cut as many as 600 workers, the companies said. Risk Aversion The Nikkei has lost 45 percent in 2008, set for its worst year on record, as the financial crisis dragged the world’s biggest economies into recession. Shares on the gauge trade at 12.3 times trailing 12-months earnings, almost a third lower than a year ago, according to Bloomberg Data. Sumitomo Mitsui Financial Group Inc., Japan’s third-largest listed bank, declined 5 percent to 378,000, while the 4.8 percent drop at NTT, Japan’s largest telephone company, left its shares at 478,000. The stocks are among 14 the Tokyo exchange will suspend from trading from tomorrow until the market opens on Jan. 5, 2009. The companies are conducting stock splits, which necessitates a trading suspension, to eliminate fractional shares as Japan eliminates paper stock certificates and shifts to an all electronic system beginning next year. Investors sold shares to avoid the risk of negative news surfacing in the next 10 days. “NTT and banks are being sold as investors adjust their holdings to account for the fact that they will not be able to trade them for a while,” said Chiba-Gin’s Ookoshi. Nikkei futures expiring in March retreated 2.6 percent to 8,510 in Osaka and slumped 1.9 percent to 8,505 in Singapore.

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