Japanese Stocks Fall After U.S. Growth Slows, S&P Ratings

By Masaki Kondo and Patrick Rial

Jan. 31 (Bloomberg) -- Japanese stocks dropped after growth slowed in the U.S., the world's biggest economy, and Standard & Poor's slashed ratings on subprime mortgage securities, raising concern banks will be forced to report more investment losses.

Canon Inc., which forecast its slowest annual profit growth this decade, plunged by the most in five months. Mitsubishi UFJ Financial Group Inc. fell for second day.

The U.S. economy grew 0.6 percent in the fourth quarter, falling from 4.9 percent in the prior three months and the slowest since the first quarter of last year. S&P lowered its credit rating on $270.1 billion of subprime mortgage bonds and said it may cut an equivalent amount of collateralized debt obligations.

``Investors were jolted back to the reality that economic growth is weakening,'' said Yoji Takeda, who oversees $1.1 billion at RBC Investment (Asia) Ltd. in Hong Kong. ``There's no end in sight yet to the subprime problem and it's unclear to what extent banks will post losses.''

The Nikkei 225 Stock Average lost 169.27, or 1.3 percent, to 13,175.76 as of 9:51 a.m. in Tokyo, while the broader Topix index retreated 21.36, or 1.6 percent, to 1,298.75.

Shares of companies relying on overseas sales also fell after the yen strengthened against the dollar to as high as 106.03 from 106.84 yesterday, after the U.S. Federal Reserve cut its benchmark interest rate by half a point to 3 percent.

The Nikkei has lost 14 percent in January and the Topix has dropped 12 percent, the worst month for both since Aug. 1998.

Nikkei futures expiring in March slumped 1.6 percent to 13,200 in Osaka and fell 1.5 percent to 13,200 in Singapore.