Japan Stocks Drop, Extend Weekly Slump, on Sony Loss Forecast

Jan. 23 (Bloomberg) -- Japanese stocks dropped, deepening the longest weekly losing streak in more than three months, as Sony Corp.’s loss forecast and worsening economic figures indicated the recession will be prolonged.

Sony, the world’s No. 2 maker of electronics, plunged 6.5 percent after projecting a loss almost four times greater than analyst estimates as sales of televisions and cameras sank. Office-equipment maker Ricoh Co. slumped 4.5 percent on a Nikkei newspaper report it may cut its profit target. JFE Holdings Inc., the No. 3 steelmaker globally, slid 5.8 percent as an economist survey showed China’s economic slowdown will deepen.

“The bad news about earnings and economies is accumulating,” Soichiro Monji, chief strategist at Tokyo-based Daiwa SB Investments Ltd., which manages the equivalent of $53 billion, said in an interview with Bloomberg Television. “Sony’s loss forecast was an order of magnitude greater than what some analysts had estimated.”

The Nikkei 225 Stock Average declined 211.23, or 2.6 percent, to 7,840.51 as of 10 a.m. in Tokyo, while the broader Topix index fell 13.73, or 1.7 percent, to 782.18. The Nikkei was poised for a 4.7 percent slump this week and the Topix slid 4.4 percent. Both gauges were set for third-straight weekly declines, the longest since the period ended Oct. 10.

The Nikkei tumbled by a record 42 percent last year as the world’s biggest economies slipped into recession, and the gauge has lost another 12 percent in 2009. The Bank of Japan yesterday said the nation’s economy will shrink 1.8 percent in the year to March 31 and 2 percent next fiscal year.

Fundamental Change

Sony yesterday joined Toyota Motor Corp. in forecasting an operating loss as the global recession worsened and a stronger yen reduced the value of repatriated overseas sales. Sony expects a record 260 billion yen ($2.9 billion) operating loss for the year to March 31. Analysts had estimated a loss of 70 billion yen.

The electronics maker “will need some time to fundamentally change the business model,” Koya Tabata, an analyst for Credit Suisse Group, wrote in a report dated yesterday. He maintained his “underperform” rating on the shares.

Sony dropped 6.5 percent to 1,813 yen, set for the lowest close since Dec. 24. Bigger rival Panasonic Corp. slid 4 percent to 1,072 yen, and Canon Inc., the world’s biggest digital-camera maker, dived 4.7 percent to 2,555 yen. Hitachi Maxell Ltd., a maker of audio and video tapes, plunged by its 100 yen limit to 780 yen after widening its annual loss estimate.

Deeper Slump

JFE retreated 5.8 percent to 2,200 yen, and Kobe Steel Ltd. slipped 3.5 percent to 137 yen. Nippon Steel Corp., the world’s second-largest maker of the alloy, lost 2.9 percent to 271 yen. A gauge of steelmakers posted the sharpest drop among 33 industry groups on the Topix.

China’s economic slowdown, already the deepest in seven years, is set to worsen, darkening the outlook for suppliers of raw materials. The nation’s gross domestic product will grow 6.3 percent this quarter from a year earlier, according to the median estimate of nine economists surveyed by Bloomberg News. The survey was conducted after yesterday’s report that China’s economy expanded 6.8 percent in the fourth quarter.

Ricoh, Japan’s No. 2 maker of office machines, slumped 4.5 percent to 1,081 yen. Falling sales of copiers and a stronger yen may push the company to cut its full-year profit forecast, the Nikkei newspaper said today.

Nikkei futures expiring in March retreated 2.5 percent to 7,830 in Osaka and slumped 2.4 percent to 7,830 in Singapore.