Japanese Stocks Drop on Yen, Commodity Decline; Honda Slumps

March 6 (Bloomberg) -- Japanese stocks retreated, extending a weekly decline, after a stronger yen darkened the profit outlook for carmakers and commodity prices fell.

Honda Motor Co., which gets more than half its sales from North America, lost 3.8 percent after the Japanese currency rose from a four-month low. Smaller rival Fuji Heavy Industries Ltd. dived 6.2 percent after saying it asked for a government loan. Mizuho Financial Group Inc., Japan’s No. 2 listed bank, sank 3.8 percent after Citigroup Inc.’s stock fell below $1 for the first time. Inpex Corp. lost 4.2 percent after crude fell yesterday.

“The weaker yen provided support for Japanese equities, and that’s dissipated,” Kiyoshi Ishigane, a senior strategist at Tokyo-based Mitsubishi UFJ Asset Management Co., which oversees about $61 billion, said in an interview with Bloomberg Television. “Citi below $1 shows we are still far from the exit of this U.S.-originated global financial crisis.”

The Nikkei 225 Stock Average declined 232.13, or 3.1 percent, to 7,201.36 as of 12:36 p.m. in Tokyo. The broader Topix index fell 17.05, or 2.3 percent, to 724.50. The Nikkei is set for a 4.9 percent drop this week, while the Topix is poised for a 4.3 percent slide. Both headed for the biggest retreat since the period ended Jan. 23.

The Nikkei lost 16 percent this year through yesterday, extending its 42 percent tumble last year, as $1.2 trillion in writedowns and credit losses globally raised doubts about the health of the financial system. A quarter of the gauge’s members have lost more than half their value in the past six months, according to Bloomberg data.

Currency Rises

The yen strengthened versus the dollar to as much as 97.72 yesterday from 99.68 earlier, the weakest since November. The yen appreciated to as much as 122.72 against the euro from 125.09 at the close of stock trading in Tokyo yesterday after European Central Bank President Jean-Claude Trichet said the current benchmark rate wasn’t the lowest the bank could reach.

Honda, Japan’s No. 2 automaker, dived 3.8 percent to 2,175 yen, while market leader Toyota Motor Corp. slid 2.5 percent to 2,910 yen. Sony Corp., which gets a quarter of its sales from the U.S., lost 2.5 percent to 1,738 yen. Fanuc Ltd. dropped 5.4 percent to 6,090 yen, after Macquarie Group Ltd. started the coverage of the industrial robot maker with an “underperform” rating, citing the “collapse” of capital investment.

Fuji Heavy, maker of Subaru-brand cars, plummeted 6.2 percent to 319 yen. The company applied for a loan from the state-run Development Bank of Japan for its daily operations, it said today. Akebono Brake Industry Co., part owned by Toyota, tumbled 13 percent to 510 yen after Chief Executive Officer Hisataka Nobumoto said failures may spread among auto-part suppliers should the government fail to provide support.

Banks Decline

Mizuho fell 3.8 percent to 178 yen, and bigger rival Mitsubishi UFJ Financial Group Inc. sank 3.3 percent to 407 yen. Tokio Marine Holdings Inc., Japan’s biggest casualty insurer, plunged 3.8 percent to 1,944 yen, extending its drop to a fifth day, while Shinko Securities Co. lost 5.4 percent to 158 yen.

In New York, the Standard & Poor’s 500 Index slid 4.3 percent to the lowest close since September 1996, led by financial companies. Shares of Citigroup, once the world’s biggest bank by value, tumbled to 97 cents before closing at $1.02, bringing this year’s decline to 85 percent.

“People probably haven’t yet understood the full depth of the financial crisis,” said Yoshinori Nagano, a senior strategist at Daiwa Asset Management Co., which oversees about $96 billion. “Should regulators assess banks’ assets under strict conditions, quite a few of these companies may be effectively insolvent.”

Inpex, Japan’s biggest oil explorer, fell 4.2 percent to 617,000 yen, while its closest domestic competitor, Japan Petroleum Exploration Co., dropped 1.7 percent to 3,560 yen. Mitsui & Co., a trading company that gets more than half its profit from commodities, sank 3.9 percent to 837 yen.

Short-Selling

Crude oil for April delivery fell 3.9 percent to settle at $43.61 a barrel in New York yesterday, while a measure of six primary metals traded in London declined 1.6 percent for the first slump in three days.

Japan’s Financial Services Agency may extend restrictions on short selling of shares, an official at the regulator said today. The temporary restrictions, implemented in October and due to expire this month, include a ban on so-called naked short-selling and requirements that investors disclose short positions over a certain threshold.

“Regulators are concerned they will send wrong messages to the market if they lift the ban,” said Daiwa Asset’s Nagano. “That is, authorities are OK with short-selling and a further tumble in the market.”

Nikkei futures expiring in March retreated 2.7 percent to 7,210 in Osaka and slumped 2.8 percent to 7,195 in Singapore.