Nikkei 225 Tumbles After Quake Rocks Tokyo; Japanese Bonds Rise

By Norie Kuboyama

March 11 (Bloomberg) -- Japan’s Nikkei 225 Stock Average tumbled 1.7 percent in Tokyo, extending declines after an 8.9 magnitude earthquake struck northeast of the capital. Government bonds rose and the yen earlier fell to a two-week low.

The Nikkei fell to 10,254.43, the gauge’s lowest close since Jan. 31 after a quake shook buildings in the nation’s financial center and the government issued a tsunami warning. The broader Topix dropped 1.7 percent to 915.51. Futures on the Nikkei expiring in June fell asmucas 3.8 percent in Singapore.






The quake struck at 2:46 p.m. local time off the coast of Sendai north of Tokyo, according to the Japan Meteorological Agency. Kyodo News said many injuries were reported in Miyagi prefecture, where a 6-meter (20 feet) tsunami hit and flooded inland areas 1.5 kilometers from shore, sweeping away cars and houses, public broadcaster NHK showed on television.

“Our traders kept working through the quake,” said Ayako Sera, a strategist in Tokyo at Sumitomo Trust & Banking Co., which manages about $331 billion in investments. “We were grabbing the edges of our desks and holding on.”

Japanese government bonds rose, sending the yield on the benchmark 10-year note down 2.5 basis points to 1.27 percent. U.S. Treasuries reversed initial losses, with the yield on the 10-year security falling one basis point to 3.35 percent.

The yen fell to as low as 83.30 versus the dollar, the lowest level since Feb. 22, before rallying to 82.75 from 82.98 in New York yesterday. Japan’s currency strengthened 0.2 percent to 114.21 per euro from 114.49, having earlier weakened to 115.02.

‘Inclination to Sell’

“This is obviously bad news and the inclination is to sell yen,” said Sean Callow, a senior currency strategist at Westpac Banking Corp. in Sydney. “The yen is a safe haven itself and the fact that Japan runs a current-account surplus means there’s a possibility that, if this is very serious, Japan might keep more of its money at home,” trimming declines, he said.

The Nikkei dropped 4.1 percent for the week, the steepest decline since July as an escalating conflict between rebels and Libyan leader Muammar Qaddafi sparked concern that rising oil prices will hinder the recovery. Stocks also fell as economic data in the U.S. showed the recovery may be slowing and a campaign finance scandal roiled Japan’s ruling party.

Toyota Motor Corp., the world’s No.1 carmaker, fell 1.5 percent to 3,595 yen. Sony Corp., Japan’s biggest exporter of electronics, declined 2.2 percent to 2,806 yen. Mitsubishi UFJ Financial Group Inc., the country’s largest publicly traded lender, dropped 2.5 percent to 431 yen.

While all 33 index groups on the Topix index declined, construction companies fell the least as traders snapped up shares ahead of what may be an expensive rebuilding process for Japan. Fukuda Corp., a general contractor based in the Northern prefecture of Niigata, surged 30 percent to 213 yen in the minutes following the quake. Ueki Corp., another builder in the prefecture, jumped 23 percent to 165 yen.

“Even as the office was shaking violently, the traders were buying up shares of builders,” said Sumitomo Trust’s Sera. “The question is: how much will the rebuilding cost?”