Shares in Marudai Food Co Ltd slumped after Moody's Investors Service placed its Baa3 issuer rating under review for a possible downgrade on concern that the disease would further depress consumption of beef and beef-related products.

Marudai, one of Japan's leading manufacturers of ham and sausages, closed down 10.66 percent at 109 yen, a low for the year. The benchmark Nikkei 225 average dropped 3.06 percent, weighed down by a fall in banking shares.

A Health Ministry official confirmed on Sunday that a cow raised in Gunma Prefecture, north of Tokyo, had become the third in Japan to test positive for mad cow disease, whose human variant is thought to have killed more than 100 people in Europe.

Japan's first case of bovine spongiform encephalopathy (BSE), to give the disease its scientific name, was confirmed in September.

There have been no reported cases of human illness or death related to the disease since then but consumers have largely ignored government assurances about the safety of Japanese beef, fleeing to fish, pork and poultry.

Some analysts said it was a good sign that the government was able to detect the infected cow through its testing system, but they said the initial reaction would be to sell the shares.

Prima Meat Packers Ltd , Japan's third-largest meat processor, saw its shares fall 9.68 percent to 56 yen.

Prima last Tuesday revised down its earnings estimates to a net loss of 13 billion yen ($105.4 million) for the business year through March from an October forecast of a 6.1 billion yen loss.

Prima's shares have fallen by a third since the revision was announced, as investors fret about the impact of mad cow disease on the company's already fragile balance sheet.

RESTAURANTS FEEL PINCH

Restaurant stocks, seen as most vulnerable to a downturn in beef consumption, suffered losses.

Japan's largest beef bowl fast-food operator, Yoshinoya D&C Co Ltd , fell 3.06 percent to 190,000 yen.

But analysts said the falls in beef-related shares were not as dramatic as with the first and second cases of BSE, with most of Monday's losses in line with the broader market.

"One cow, two cows, now three -- the reaction by the market to this news is thinning," said Masafumi Nakayama, strategist at Mito Securities.

"I think the market will become more and more immune to these cases."

Shares in beef-bowl chain Matsuya Foods Co Ltd , Yoshinoya's main rival, fell 3.07 percent to 2,210 yen while third-ranked Zensho Co Ltd slid 4.72 percent to 1,472 yen.

Shares in McDonald's Co (Japan) Ltd slipped 2.49 percent to 3,520 yen while those in ``yakiniku'' (barbecued beef) chain operator Reins International Inc fell 1.88 percent to 2.09 million yen.

In October, sales at existing Japanese-style fast food restaurants, which include beef-bowl operators, fell 15.2 percent year-on-year and sales at existing ``yakiniku'' chains fell 46.3 percent from the previous year, according to the Japan Food Service Association.

"For individual firms, however, there is still very little visibility as to how this will affect their earnings down the road," said Nakayama.

After the market close, Yakinikuya Sakai Co Ltd , a chain of barbecued beef shops, posted a parent net loss for the six months to October 20, 2001 and forecast a full-year loss of 343 million yen.

"It is extremely difficult to see a sudden recovery in sales in the second half of the year," the company said in a statement.

Dairy-related shares also slipped after investigators searching for the cause of the outbreak zeroed in on a milk substitute, made from milk powder and plasma proteins from pig and beef tallow, that may have been fed to all three cows.

Cautious investors sent Meiji Milk Products Co Ltd 6.45 percent lower to 348 yen, while Japan's largest dairy products maker, Snow Brand Milk Products Co Ltd , slid 4.41 percent to 217 yen.

($1=123.33 yen)  
 
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