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Feb. 15, 2013, 4:30 a.m. EST

Japan stocks tumble on yen strength before G-20

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By Sarah Turner and V. Phani Kumar, MarketWatch

HONG KONG (MarketWatch) — Japanese stocks fell sharply Friday to return most of the gains recorded earlier in the week as the yen strengthened ahead of a meeting of the world’s top finance ministers.

The Nikkei Stock Average /zigman2/quotes/210597971/delayed JP:NIK -0.39% dropped 1.2% to 11,173.83.

The decline came as cautious investors looked ahead to a meeting of finance ministers and central bankers from the Group of 20 nations, amid expectations that the yen’s steep fall over the last few weeks may be in focus at the meeting.

“Japan continues to grab headlines in Asia with plenty of yen positioning ahead of the G20 meetings. The Nikkei has lost ground as the yen appreciates, heading into the meeting,” said IG Markets strategist Stan Shamu.

Click to Play

How betting against the yen paid off

U.S. hedge-fund investors made billions off the weakening yen. The prospect of inflation in Japan as the yen weakens may prompt people to turn to gold as a currency hedge.

Despite the sharp fall on Friday, the Nikkei finished the week 0.2% higher, marking its 13th advance in the last 14 weeks.

The dollar /zigman2/quotes/210561789/realtime/sampled USDJPY -0.0717% slipped as low as 92.22 yen during the session in Asia, from around ¥92.85 late Thursday in North America, after spending much of the week above ¥93. Read Currencies report.

A strengthened yen affects the global competitiveness of Japanese products, and often tends to hurt stocks of companies reliant on overseas demand.

Several currency-sensitive stocks lost ground, with Toyota Motor Corp. /zigman2/quotes/200537742/composite TM +1.26%   /zigman2/quotes/203803129/delayed JP:7203 +1.15%  sliding 1.9% and Subaru maker Fuji Heavy Industries Ltd. /zigman2/quotes/203522406/delayed JP:7270 +0.22%   /zigman2/quotes/200526066/composite FUJHY +0.21%  off 1.7%, while Panasonic Corp. /zigman2/quotes/201785256/delayed JP:6752 -1.74%   shed 0.9%.

Shares of Sony Corp. /zigman2/quotes/201361720/delayed JP:6758 +0.67%   /zigman2/quotes/208567357/composite SNE -0.55%  fell 1.9%.

U.S. videogame-console and software sales dropped in January, according to NPD Group, and Sony is widely expected to unveil its new gaming console at an event Feb. 20. Read: Videogame industry’s U.S. sales fall in January.

Other movers

The market moves were more modest elsewhere in Asia, with South Korea’s Kospi /zigman2/quotes/210598069/delayed KR:180721 +0.39%  and Hong Kong’s Hang Seng Index /zigman2/quotes/210598030/delayed HK:HSI -1.60%  each gaining 0.1%, while Australia’s S&P/ASX 200 /zigman2/quotes/210598100/delayed AU:XJO -0.62%  slipped 0.1%.

The Kospi ended the week 1.6% higher, and was followed by a 1.3% gain for the S&P/ASX 200 and a 1% rise for the Hang Seng Index.

Mainland Chinese and Taiwanese markets, which remained closed for a holiday, are set to reopen on Monday.

Downbeat earnings reports contributed to the losses in Tokyo and Sydney.

Japanese steel giant Nippon Steel & Sumitomo Metal Corp. /zigman2/quotes/209782682/delayed JP:5401 -1.79% /zigman2/quotes/203679980/composite NISTF -10.67%  fell 2% after it released a weaker-than-expected earnings forecast for its fiscal year on Thursday. Read: Nippon Steel & Sumitomo Metal pulls out profit.

Kirin Holdings Co. /zigman2/quotes/200413497/delayed JP:2501 -6.25%   /zigman2/quotes/200156106/composite KNBWY -1.34%  fell 4.9% after the Japanese brewer said its 2013 pretax profit will likely fall 5% on sales promotion costs, according to a Nikkei news report.

Also trending lower after its earnings report, Trend Micro Inc. /zigman2/quotes/206023532/delayed JP:4704 -1.67% /zigman2/quotes/205788499/composite TMICY -2.18%  lost 6.1%.

Meanwhile, Australia & New Zealand Banking Group Ltd. /zigman2/quotes/205482049/delayed AU:ANZ +0.23% /zigman2/quotes/204542251/composite ANEWF -1.38%  declined 1% in Sydney after the banking major reported a 20% drop in first-quarter net profit amid soft economic conditions. Read: Australia’s ANZ posts 20% drop in Q1 profit.

Miners also fared poorly, led by Rio Tinto Ltd. /zigman2/quotes/200083756/delayed AU:RIO -2.89% /zigman2/quotes/202627887/composite RIO -2.42% . Rio’s shares dropped 2.7% after the mining giant Thursday reported its first fiscal-year loss. Read: Rio Tinto swings to loss on weaker prices, charge.

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Sarah Turner is MarketWatch's bureau chief in Sydney. Follow her on Twitter @SarahTurnerMKTW. Varahabhotla Phani Kumar is a reporter in MarketWatch's Hong Kong bureau. Follow him on Twitter @MktwKumar.

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