Japanese stocks fell the most in a month as China devalued its currency for a second day, heightening concern growth may slow in the world’s second-largest economy and dampening the outlook for Japanese exporters.
Koito Manufacturing Co., which relies on China for about a quarter of its car headlight sales, dropped 3.6 percent. A measure of energy shares slumped the most since March as oil traded near a six-year low. Concerns that a weaker yuan would reduce spending by Chinese tourists sent retailers reeling, including J Front Retailing Co., which lost 4.1 percent.
The Topix index plunged 1.3 percent to 1,665.75 at the close in Tokyo, the biggest decline since July 8. The Nikkei 225 stock average sank 1.6 percent to 20,392.77. The yen soared by a record against the yuan in offshore trading, bringing its two-day gain to more than 5 percent.
The devaluations “aren’t likely to stop after just two times,” said Daisuke Miyabe, a strategist at Shinko Asset Management Co. in Tokyo. “Not that it will continue endlessly, but they’ll probably keep looking for a level where it stabilizes.”
China’s policy shift follows economic reports this month that showed a plunge in overseas shipments, weaker-than-estimated manufacturing and slowing credit growth. The moves to support exporters and stem the deepest economic slowdown since 1990 heightens the risk of competitive currency devaluations as global demand wanes.
On Tuesday, the People’s Bank of China said it will let markets play a bigger role in dictating its currency’s moves. Wednesday’s fix was 1.6 percent lower than Tuesday’s level, but just 0.1 percent away from the previous day’s closing price.
Weaker-than-expected reports Wednesday on Chinese industrial output and retail sales in July lowered the outlook for the economy, putting additional downward pressure on an already weakening currency.
“For the time being, Japanese markets will be hanging on every word coming out of China,” said Osamu Koizumi, Tokyo-based executive officer at Meiji Yasuda Asset Management Co. “Japanese firms that were bought on expectations of higher demand from Chinese tourists could see the most impact.”
J Front Retailing slumped 4.1 percent, while electronics retailer Bic Camera Inc. tumbled 5.1 percent.
Companies that rely on China for sales fell. Koito dropped 3.6 percent, while Murata Manufacturing Co., which sells 58 percent of its electronic components in China and Taiwan, slid 3.6 percent.
Energy shares were hammered as China’s devaluation sent commodities lower, including oil and copper, which declined to a six-year low. Inpex Corp. lost 3.2 percent, while lead and copper alloy producer Mitsui Mining & Smelting Co. sank 2.8 percent to the lowest close since April.
Asics Corp. was one of the few standouts after Mitsubishi UFJ Morgan Stanley Securities Co. raised its rating on the maker of athletic shoes to buy from neutral, citing optimism over accelerating growth in Asian markets. Shares closed 4.2 percent higher.
Minutes from the Bank of Japan’s July 14-15 meeting, released Wednesday, showed most members see the inflation trend continuing to improve. A government-compiled index on wholesale prices shrank 3 percent from a year earlier in July, compared with economist estimates for a 2.9 percent drop.
Futures on the Standard & Poor’s 500 Index sank 0.6 percent after the underlying measure slumped 1 percent on Tuesday in New York.
Carmakers and luxury-goods producers slipped, with the yuan’s steepest decline in at least 20 years seen as eroding the buying power of Chinese consumers. The Stoxx Europe 600 Index fell 1.6 percent. Emerging-market stocks entered a bear market.