Japanese stocks dropped after Federal Reserve Chairman Ben S. Bernanke said inflation remains his main concern, even in the face of evidence the U.S. economy is slowing.
Toyota Motor Corp. led declines by exporters after the yen strengthened against the dollar, cutting the value of their overseas sales.
``Bernanke implied an early rate cut is not likely,'' said Soichiro Monji, who helps oversee about $47 billion at Daiwa SB Investments Ltd. in Tokyo. ``Weak U.S. economic indicators should result in a weak dollar, so that is another negative for the Japanese market. Theoretically, these factors should only affect the exporters, but the events are affecting investor sentiment generally.''
Inpex Holdings Inc. led gains by oil-related companies after the price of crude climbed.
The Nikkei 225 Stock Average lost 158.48, or 0.9 percent, to 17,096.25 at the 11 a.m. break in Tokyo. The broader Topix index slid 15.77, or 0.9 percent, to 1695.29. Only two of the 33 industry groups included in the Topix advanced.
The Nikkei has fallen 0.8 percent so far this quarter, while the Topix has gained 0.9 percent, set for a third consecutive period of gains.
Toyota, the world's No. 2 automaker, slid 70 yen, or 0.9 percent, to 7,550. Sony Corp., the maker of the PlayStation 3 game console, dropped 150 yen, or 2.5 percent, to 5,930. Canon Inc., which generated almost 75 percent of its sales from overseas last year, fell 120 yen, or 1.9 percent, to 6,290.
Inflation A Risk
``Our policy is still oriented towards control of inflation, which we consider to be at this time to be the greater risk,'' the Fed's Bernanke told the Joint Economic Committee of Congress in Washington yesterday.
Those comments came a week after the central bank dropped a reference to possible ``additional firming'' of monetary policy in a statement accompanying its latest interest rate decision. That cheered investors who believed the path was being paved for rate cuts.
``The Japanese market has to be conscious of the implications of Bernanke's comments,'' said Juichi Wako, a strategist at Nomura Securities Co. in Tokyo. ``The recent tendency toward a stronger yen makes it hard to buy the exporters.''
Meanwhile, durable-goods orders excluding transportation unexpectedly fell 0.1 percent, the Commerce Department said yesterday, a second month of declines. Orders for good made to last several years were expected to rise 1.8 percent, according to the median forecast of economists in a Bloomberg survey.
The data added to concern U.S. growth is slowing triggered by reports this week that the housing market continues to deteriorate and consumer confidence is waning.
The Dow Jones Industrial Average fell 0.8 percent to 12,300.36 and the Standard & Poor's 500 Index lost 0.8 percent to 1417.23.
The yen strengthened 0.8 percent to 116.85 against the dollar in New York, its biggest climb since March 13. A stronger yen decreases the value of Japanese exporters' dollar- denominated sales when converted back into local currency, while their products become less competitive abroad. Japan's currency recently changed hands at 116.97 versus the dollar.
Oil-related companies advanced. Inpex, Japan's biggest oil explorer, added 5,000 yen, or 0.5 percent, to 999,000. Japan Petroleum Exploration Co., the second biggest, climbed 150 yen, or 1.8 percent, to 8,500. Idemitsu Kosan Co., the nation's No. 2 oil refiner, advanced 150 yen, or 1.2 percent, to 13,170.
Lending Rate Cut
Crude oil for May delivery rose 1.8 percent to $64.08 a barrel in New York yesterday, the highest close since Sept. 11.
Credit Saison Co. led declines by consumer finance companies, tumbling 270 yen, or 6.8 percent, to 3,680. That was the largest percentage slide among 1,891 stocks worldwide in the Morgan Stanley Capital International World Index. The credit card issuer said yesterday it will lower the maximum interest rate it charges for loans to 18 percent from 27.8 percent.
Other lenders also dropped. OMC Card Inc., another credit card company, slid 24 yen, or 2.6 percent, to 917. Credia Co., which provides a variety of lending services, lost 27 yen, or 4.7 percent, to 554.
Hokuriku Electric Power Co., based in Toyama City, slumped 70 yen, or 2.5 percent, to 2,715. The company said yesterday it will keep its two nuclear reactors shut for at least a year after revealing that it failed to disclose a critical accident in 1999.
Isetan Co., Japan's fifth-largest department store operator, slid 95 yen, or 4.5 percent, to 2,015 after the recommendation on the shares was cut to ``reduce'' from ``hold'' at Mizuho Securities Co.
Sanyo Electric Co., the maker of about 40 percent of the world's mobile-phone batteries, added 4 yen, or 2.1 percent, to 191. The company named Seiichiro Sano as president yesterday, marking the first time the company will be run by someone outside the founding Iue family. That may make it easier for the banks that control the management board to shed unprofitable units.
Nikkei futures expiring in June declined 0.8 percent to 17,110 in Osaka and fell 0.6 percent to 17,140 in Singapore.
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