Fear of Subprime Losses in Japan

123jump.com Staff
05 Mar, 2008
New York City

Capital spending in the fourth quarter declined 7.3% as businesses curtailed their budget. The higher than expected decline in spending and rising worries related to subprime losses in Japan dragged market averages lower. Nikkei 225 index declined 0.16% or 20.22 to 12,972.06. Of the index stocks, 124 stocks declined and 89 gained. Marubeni led the gainers in the index with a rise of 8.5% and Okuma Corp led the decliners with a loss of 4.6%.

[R]5:00AM New York, 7:00PM Tokyo - Japan’s fourth quarter capital spending tumbles 7.3%. Toyota Motor Corporation is mulling entering aircraft industry.[/R]

Japan’s stock averages declined after a government report showed that capital spending in the three months to December fell by more than double what the economists had forecasted. Declining oil and commodity prices also widened losses.

Market Sentiment

In Tokyo trading Nikkei 225 declined 0.16% or 20.22 to 12,972.06, and the broader Topix Index fell 0.1% or 1.75 to 1,263.91.

In the first section of the Tokyo Stock Exchange 8.3 billion shares worth 919 billion yen were traded and in the second section 197 million shares worth 3.1 billion yen changed hands.

Of the Nikkei 225 stocks 89 gained, 124 declined and 2 were unchanged. Marubeni Corp led advancers in the Nikkei 225 index shares with a rise of 8.54% followed by Sky Perfect JSAT increasing 8.46%.

Capital Spending Drops

Japan’s Ministry of Finance reported today on its web site that fourth quarter capital spending, excluding software, plunged 7.3%, surpassing forecast of 3.5% from most economists. However, capital spending, including software, fell by 7.7% in the three months to December.

While manufacturing increased spending by 0.5%, service companies dropped by 11.5%.

Economists believe the decline in capital spending will lead to a downward revision of the economic growth estimate next week.

Bank of Japan to meet Friday

The Bank of Japan will meet on March 7 to decide on the country’s monetary policy position as incumbent Bank of Japan Governor Toshihiko Fukui chairs his last board meeting. Fukui’s term is due to expire on March 19. Monetary authorities are confronted with rising inflation and slowing economic growth.

Separately, the Nikkei news reported that Prime Minister Yasuo Fukuda said today the Bank of Japan will be appointed before the next term begins, notwithstanding the current standoff over the nomination between the ruling party and the opposition.

Gainers & Losers

Marubeni Corp. led advancers in the Nikkei 225 shares with a rise of 8.54% led by rises in Sky Perfect JSAT of 8.46%, in OKI Electric Industries of 4.93%, in Mitsui & Co of 4.91%, and in Nippon Mining House of 4.62%.

Okuma Corp. led the decliners in the Nikkei 225 index shares with a drop of 4.62% followed by losses in Kumagai Gumi Co of 3.48%, in CSK Holding Corp. of 3.39%, in Yokohama Rubber of 3.32%, and in Asahi Glass Co. of 3.28%.

Domestic economy related shares fell after a government report showed that consumer spending, excluding software, fell 7.3% in the fourth quarter.

Financial stocks fell after Merrill Lynch said Citigroup’s subprime related writedowns and CDOs will whittle the company’s earnings to a loss of $1.66 per share on estimated $18 billion in losses. Mizuho Financial Group shed 3.12% and Mizuho Trust & Banking plunged 1.88% as a result.

Exporters fell after the yen rose 0.32% to 103.48 against the dollar.

Toyota to venture into aircraft

AFP news reported Toyota spokeswoman Kayo Doi said today Toyota Motor Corp. is mulling entering the aircraft industry through investing in Mitsubishi Heavy Industries passenger jet project. The carmaker will inject 10 billion yen in the venture to be set up in April.

Asian Markets Indexes

In Tokyo Nikkei 225 Index closed lower 20.22 or 0.16% to 12,972.06, in Hong Kong Hang Seng index decreased 5.53 or 0.02% closed to 23,114.34. Australia ASX 200 index decreased 3.70 or 0.07% to close 5,376.60.

In South Korea Kospi Index increased 0.92 or 0.05% to close at 1,677.10, in Thailand SET index closed lower 6.43 or 0.77% to 824.98 and Indonesia JSE Index edged increased 4.90 or 0.19% to 2,639.65. Sensex index in India increased 202.19 or 1.24% to 16,542.08.