Japan's Topix Falls to Two-Year Low; Exporters, Banks Drop

By Patrick Rial


Nov. 12 (Bloomberg) -- Japanese stocks dropped, driving the Topix index to the lowest in more than two years, after reports of subprime losses at U.S. banks sent the dollar tumbling, clouding the profit outlook for companies including Canon Inc.

Canon, which generated almost 75 percent of its sales overseas last year, slid to the lowest in three months. Mizuho Financial Group Inc. tumbled to the lowest since August 2005 on concern more announcements of subprime losses may be forthcoming.

In the U.S., the Standard & Poor's 500 Index slumped 1.4 percent on Nov. 9 after Wachovia Corp. announced losses on subprime-related investments, while Bank of America Corp. and JPMorgan Chase & Co. also said their earnings may suffer.

``It's not just the decline in U.S. stocks that we need to worry about; investors are reducing risk, which is causing yen strength across a lot of currencies, and that's bad for the exporters,'' said Norihiro Fujito, a senior strategist at Mitsubishi UFJ Securities Co. in Tokyo.

The Nikkei 225 Stock Average lost 409.38, or 2.6 percent, to 15,174.04 as of 9:49 a.m. in Tokyo, a level not seen since August 2006. The broader Topix declined 39.63, or 2.7 percent, to 1,454.72, the lowest since Oct. 31, 2005.

Canon slid 130 yen, or 2.3 percent, to 5,450. Honda Motor Co., which expects the yen to average 113 per dollar this year, declined 120 yen, or 3.1 percent, to 3,780. Sony Corp., the maker of the PlayStation 3 game console, lost 110 yen, or 2.1 percent, to 5,240.

Subprime Losses

Wachovia, the fourth-biggest U.S. bank, said on Nov. 9 it may have lost as much as $1.7 billion this quarter on mortgage- related investments. Bank of America and JPMorgan, the No. 2 and No. 3 lenders, reported that their fourth-quarter results may be hurt by tightening credit markets.

The dollar weakened to as low as 110.22 against the yen today, a level not seen since May 2006. It recently changed hands at 110.50. Versus the euro, the yen climbed to as high as 161.74, the highest since Oct. 24. A stronger yen decreases the value of exporters' dollar-denominated sales when converted into local currency.

Mizuho, the nation's second-biggest publicly traded lender, slid 17,000 yen, or 3.2 percent, to 514,000. Sumitomo Mitsui Financial Group Inc., the third largest, dropped 23,000 yen, or 3.1 percent, to 727,000. The Nikkei newspaper reported toward the end of Nov. 9 trading that Mizuho's investment banking unit may have losses in excess of 100 billion yen ($902 million.)

Nippon Telegraph & Telephone Corp., the country's largest telephone company, climbed 14,000 yen, or 2.8 percent, to 508,000 after Nomura Holdings Inc. boosted its recommendation on the shares to ``buy.''

Nikkei futures expiring in December dropped 2.4 percent to 15,160 in Osaka and slumped 2.6 percent to 15,165 in Singapore.

In other Asian markets open for trading, Australia's S&P/ASX 200 Index slipped 0.6 percent and South Korea's Kospi index lost 2.7 percent.