Japanese stocks slumped the most this month on concern weakening demand will delay earnings recoveries at Toyota Motor Corp. and Sony Corp., and a plunge in commodities prices drove down resource shares. Toyota sank 4.1 percent after the Yomiuri newspaper said the automaker’s domestic output may fall. Sony, which gets a quarter of its sales from the U.S., retreated 5.1 percent after Nikko Citigroup Ltd. cut its rating and the yen strengthened. Mitsui & Co., Japan’s No. 2 trading house by market value, dived 6.9 percent after oil and copper prices fell. Mitsubishi UFJ Financial Group Inc. lost 2.2 percent as increased reserves at Bank of America Corp. sparked concern loan losses will swell. The Nikkei 225 Stock Average sank 275.33, or 3.1 percent, to 8,649.42 as of 12:36 p.m. in Tokyo, set for the sharpest drop since March 30. The broader Topix index fell 25.68, or 3 percent, to 822.62, with more than 90 percent of its members declining. “The global economy is still deteriorating, and there isn’t sufficient evidence to say we’ve hit bottom,” said Naoteru Teraoka, who helps oversee $21 billion at Chuo Mitsui Asset Management Co. in Tokyo. “People are pulling back from the excessively optimistic stance that the economy will quickly right itself.” Toyota, the biggest automaker globally, may produce 2.8 million vehicles in Japan in the year to March 2010, the Yomiuri said today. That would be the first time in 31 years output came in below 3 million units, the level needed for the carmaker to maintain its full-time workforce, the Japanese-language newspaper said, citing people familiar with the matter. Toyota Influence Toyota fell 4.1 percent to 3,710 yen, and closest domestic rival Honda Motor Co. lost 5.1 percent to 2,725 yen. Aisin Seiki Co., an auto-parts maker part-owned by Toyota, retreated 4.6 percent to 1,956 yen. Automakers were the second-biggest drag on the Topix, following electronics manufacturers. “Toyota’s production has a large influence over a wide range of parts manufacturers,” Fumiyuki Nakanishi, a strategist at SMBC Friend Securities Co., said in an interview with Bloomberg Television. Sony, the world’s No. 2 maker of consumer electronics, declined 5.1 percent to 2,520 yen. Nikko Citigroup cut Sony to “hold” from “buy,” saying an earnings recovery will take time because of the global recession. Canon Inc., which gets a third of its sales from the Americas, slid 5.8 percent to 2,910 yen. The Japanese currency touched 97.66, a level not seen since March 31, compared with 98.89 at the close of stock trading in Tokyo yesterday. A stronger local currency diminishes the value of overseas sales for Japanese companies. ‘Little Chance’ The Nikkei has risen by more than a quarter from a 26-year low on March 10 amid speculation the worst of the global recession has passed. The gauge’s members yesterday traded at 220 times their estimated net income for this fiscal year, according to index compiler Nikkei Inc., the highest level since January 2002. “There is little chance to win if investors bet on ambiguous hope the economy will recover,” Norihiro Fujito, senior investment strategist at Tokyo-based Mitsubishi UFJ Securities Co., wrote in a Japanese-language report yesterday. “It’s hard to ignore that shares have become more expensive from a valuation standpoint.” Mitsui & Co. dived 6.9 percent to 1,110 yen. Bigger competitor Mitsubishi Corp. slid 6.7 percent to 1,567 yen, while Itochu Corp. fell 6 percent to 544 yen. Crude oil for May delivery plunged 8.8 percent to $45.88 a barrel yesterday, the lowest settlement since March 11. Copper futures for July delivery slid 4.2 percent, the sharpest decline since Feb. 17. Oil and copper extended drops today. Bank Losses Mitsubishi may have a 100 billion yen ($1.02 billion) drop in net income for the year to March 2010 because of falling prices for coking coal, the Nikkei newspaper said today. Mitsui and Itochu may also see lower coal prices hurt their profits by 10 billion yen to 30 billion yen, Nikkei said. Mitsubishi UFJ, which owns 21 percent of U.S. bank Morgan Stanley, lost 2.2 percent to 485 yen. Mizuho Financial Group Inc., which invested $1.2 billion in Merrill Lynch & Co. before its purchase by Bank of America, lost 2 percent to 193 yen. Orix Corp., Japan’s largest non-bank financial company, slid 7.4 percent to 4,400 yen after Nomura Holdings Inc. lowered its rating on the stock to “neutral” from “buy.” The Standard & Poor’s 500 Index slid 4.3 percent in New York yesterday, the most since March 2, led by financial companies after Bank of America said it increased reserves for future loan losses by 57 percent since the end of December. JPMorgan Chase & Co. said on April 17 that U.S. banks are likely to have about $400 billion more in losses on soured assets. Nikkei futures expiring in June retreated 3.1 percent to 8,650 in Osaka and slumped 3.3 percent to 8,645 in Singapore.

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