Japan Stocks Drop as Europe Impasse Weighs on Banks, Exporters - BusinessWeek

Oct. 4 (Bloomberg) -- Japanese stocks fell, with the Nikkei 225 Stock Average dropping to its lowest level in a week, as discord among European policy makers fueled concern the region will fail to resolve its debt crisis, stalling global growth.

Mitsubishi UFJ Financial Group Inc., Japan's largest lender by market value, fell 3.8 percent, its steepest drop in over six months after financial shares plunged in New York. Mitsubishi Corp., Japan's biggest trading company, dropped 5.7 percent on lower commodity prices. Kawasaki Kisen Kaisha Ltd. tumbled 4.5 percent after the shipping line said it expects a loss because of slumping cargo rates.

The Nikkei 225 fell 1.1 percent to 8,456.12 at the 3 p.m. close of trading in Tokyo, its lowest close since Sept. 26. The measure tumbled 11 percent last quarter, its worst performance since the three months ended June 2010. The Topix lost 1.5 percent to 736.18 today, with about four shares falling for each that gained.

“If we don't get a resolution in Greece, we may see a disorderly default,” said Koichi Kurose, chief economist in Tokyo at Resona Bank Ltd. which oversees the equivalent of $68 billion in assets. “The politicians are all over the place. Stocks are pricing in a scenario where the financial crisis spreads in Europe, the U.S. economy worsens and it leads to a deterioration in the global economy.”

The Standard & Poor's 500 Index fell 2.9 percent yesterday, dropping to a one-year low, led by financial shares amid concern that Europe's debt crisis will spill over into the banking system. Futures on the S&P 500 climbed 0.6 percent today.

Greek Crisis

German Finance Minister Wolfgang Schaeuble yesterday opposed moves to further increase the scale of a euro-area rescue fund until three countries approve a previous upgrade. Slovakia, the Netherlands and Malta have yet to ratify an earlier decision to expand the European Financial Stability Facility to 440 billion euros ($584 billion).

Europe's financial leaders are fighting on multiple fronts, trying to extinguish the Greek crisis while insulating Italy and Spain and shoring up banks that the International Monetary Fund says face as much as 300 billion euros in credit risk.

Japanese lenders dropped. Mitsubishi UFJ Financial dropped 3.8 percent to 331 yen, its steepest decline since March 29. Sumitomo Mitsui Financial Group Inc., the country's second- largest bank by market value, dropped 1.5 percent to 2,114 yen.

Slower Global Growth

“The main thing that's driving down the market is Europe,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “There's this worry that Europe is going to implode and drag down the U.S. with it. It's not good for Asia.”

Goldman Sachs Group Inc. lowered its forecast for world growth to 3.5 percent next year from a previous outlook of 4.3 percent, citing Europe's deterioration. The U.S. also faces a 40 percent chance of a recession, the investment bank said.

More than $10 trillion was wiped from global equity markets last quarter. Benchmark measures for 36 out of 45 nations in the MSCI All-Country World Index posted declines of 20 percent or more from their peaks, meeting the common definition of a bear market, according to data compiled by Bloomberg. Besides the U.S., only two other developed markets -- the U.K. and New Zealand -- haven't dropped 20 percent or more from their most- recent highs.

Mitsubishi Corp.

Trading firms and commodity-related companies declined in Tokyo after oil and copper prices fell. Mitsubishi Corp., which gets about 43 percent of its revenue from commodities, slumped 5.7 percent to 1,429 yen, the biggest decline on the Nikkei 225. Smaller rival Mitsui & Co. lost 2.9 percent to 1,043 yen.

Crude oil tumbled 2 percent in New York yesterday to its lowest level in more than a year amid concern that slower growth will mean less fuel consumption. Copper futures for December delivery fell below $3 a pound to a 14-month low on signs that demand for industrial metals will wane.

Kawasaki Kisen dropped 4.5 percent to 148 yen after saying it expects a net loss of 30 billion yen in the fiscal year ending March 31 because of slumping shipping rates and a drop in the value of shares it owns. Japan's third-largest shipper by sales had forecast a profit of 2 billion yen.

Komatsu Ltd., the world's second-largest maker of construction and mining equipment, slumped 5.1 percent to 1,540 yen. Morgan Stanley MUFG Securities Co. lowered its target price on Komatsu to 2,900 yen from 3,400 yen, citing falling revenue from China.

Automakers, still affected by parts shortages stemming from Japan's March 11 earthquake disaster, declined after reporting falling sales in the U.S. Toyota Motor Corp. dropped 2.5 percent to 2,568 yen. The automaker said sales plunged 17 percent last month in the U.S., its largest market.

Honda Motor Co.'s U.S. sales slipped 8 percent, exceeding a 6.1 percent estimate by five analysts' in a Bloomberg survey. Shares of Honda lost 2.8 percent to 2,202 yen.

--With assistance from Yoshiaki Nohara and Toshiro Hasegawa in Tokyo. Editors: Jason Clenfield, Jim Powell.

View the original article here

Japan bank lobby head: more vigilance in trades with Europe banks - Reuters

* Says Japan banks more vigilant in trades with European banks

* Says does not think Japan banks will need to waive Tepco debt

* Says interbank liquidity situation far from 2008 crisis (Rewrites, adds details)

By Taiga Uranaka

TOKYO, Sept 15 (Reuters) - Japanese banks have become increasingly vigilant about trades with European banks, the chairman of the Japanese Bankers Association said on Thursday, as concerns mount about credit risks at the region's financial institutions.

Katsunori Nagayasu, also president of Mitsubishi UFJ Financial Group , added that he did not believe Tokyo Electric Power's (Tepco) creditor banks would have to waive debt to the operator of the crippled Fukushima nuclear plant, since a scheme to compensate victims of the radiation crisis would help it to remain solvent.

Nagayasu said Japanese banks had been very careful even in normal circumstances in dealings with individual European banks as necessary, but had been taking a cautious stance toward European banks overall since July.

"We have become more vigilant in our operations lately," he told a regular news conference of the bankers' association.

Moody's Investors Service cut the credit ratings of two French banks on Wednesday because of their exposure to Greek debt, highlighting growing risks to Europe's financial sector from the deepening euro zone sovereign debt crisis.

Banks would find it increasingly difficult, or costly, to borrow money from peers in the interbank market when there is doubt about their creditworthiness.

Increased nervousness about credit risks in the interbank market has had an impact on Japanese banks' funding activities but the situation is not nearly as dire as the liquidity crunch that followed Lehman Brothers' collapse in 2008.

"It's true that, compared with normal times, we're leaning slightly toward the crisis zone, but it's not really a crisis," Nagayasu said.

The possibility that Tepco's lenders may be asked to waive some of its debt re-emerged this week when Japan's new trade minister, Yukio Edano, said the utility's shareholders and creditors should shoulder their share of the burden for a taxpayer-funded bailout.

"I don't anticipate the need to waive debt for Tepco at all," Nagayasu said.

"Our understanding is that (the bailout scheme) was formulated on the premise of not letting Tepco become insolvent and no need for debt waivers," he said.

Japan's top banks, including Nagayasu's MUFG, Japan's biggest bank by assets, were among lenders that provided about 2 trillion yen ($26 billion) in emergency loans to Tepco in the immediate aftermath of the March 11 earthquake and tsunami, which triggered the world's worst nuclear crisis in a quarter century. ($1 = 76.720 Japanese Yen) (Editing by Edmund Klamann)

View the original article here