Sompo Japan Insurance Inc., the nation's third-largest casualty insurer, sank the most in a week after Barron's said the U.S. government is preparing to rescue mortgage lenders Fannie Mae and Freddie Mac. Seven & I Holdings Co., the nation's biggest retailer, lost 2.1 percent and Nintendo Co. fell to a five-month low as the central bank described the economy as ``sluggish.''
The Nikkei 225 declined 300.40, or 2.3 percent, to close at 12,865.05 in Tokyo, the biggest drop since July 8. The broader Topix index tumbled 28.21, or 2.2 percent, to 1,235.54, the lowest close since April 1. All 33 industry groups on the Topix fell, and the trading volume of shares listed on the index was the lowest since April 14.
The U.S. may recapitalize Fannie and Freddie, which own or guarantee 42 percent of the $12 trillion in U.S. home loans, Barron's said, citing a person in the Bush administration it didn't identify. The lenders shares fell the most in almost two decades, sending U.S. stocks down the most in more than a week.
The collapse of the U.S. mortgage market has sparked more than $500 billion in asset writedowns and credit losses at global financial companies.
Japan's gross domestic product shrank last quarter for the first time in a year as exports fell. Growth in shipments to China, which accounted for 17 percent of exports, dropped by more than half in June from the previous month, the Finance Ministry said July 24.