Japan Stocks Fall, Led by Honda, on Fed Outlook, Yen, Oil Price

Japanese stocks fell, led by exporters such as Honda Motor Co., after the Federal Reserve cut its 2008 growth forecast for the U.S. economy, and the yen rose to a two-year high against the dollar.

Shares also dropped on concern crude oil prices near $100 per barrel will curb profit. Mitsui O.S.K. Lines Ltd., Japan's second-largest shipping line, fell 5.5 percent, and Mitsui Chemicals Inc. declined 3.8 percent.

``A slowing U.S. economy puts negative pressure on Japanese corporate earnings,'' said Masaki Iso, who oversees about $7.3 billion as head of Japanese equities at Yasuda Asset Management Co. in Tokyo. ``Corporate earnings are still sensitive to the dollar-yen exchange rate. The sensitivity is less now than 10 years ago, but overseas sales are still a big part of Japanese corporate earnings.''

The U.S. is Japan's biggest overseas market.

The Nikkei 225 Stock Average fell 373.86, or 2.5 percent, to 14,837.66 at the close of trading in Tokyo, the lowest since July 24, 2006. The broader Topix index slumped 30.55, or 2.1 percent, to 1,438.72, a level not seen since October 2005.

Honda, Japan's second-largest carmaker, dropped 170 yen, or 4.5 percent, to 3,620, falling the most since Aug. 17. Toshiba Corp., the world's second-biggest maker of flash memory chips, lost 35 yen, or 4 percent, to 841. Toyota Motor Corp., the world's most valuable carmaker and second in U.S. auto sales this year, fell 170 yen, or 2.8 percent, to 5,940.

The Fed lowered its 2008 U.S. growth forecast at its last meeting to as little as 1.8 percent from a previous estimate of 2.5 percent to 2.75 percent, according to minutes released by the central bank yesterday. It also expressed concern about credit-market losses.
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