Japan Stock Futures Decline as Economic Stimulus Optimism Fades

Japanese stock futures fell, indicating the benchmark Nikkei 225 Stock Average may drop for a third day, amid concern a three-month slide by the yen that helped boost the equity market already accounts for potential stimulus measures.

American Depositary Receipts of Nissan Motor Co., a Japanese carmaker that derives almost 80 percent of sales overseas, slid 1 percent. Shares of Mitsubishi Electric Corp. (6503), a maker of air-conditioners and satellites, may be active as Mizuho Securities downgraded its recommendation on the shares.

Futures on Japan’s Nikkei 225 expiring in March closed at 10,425 in Chicago yesterday, down from 10,480 at the close in Osaka, Japan. They were bid in the pre-market at 10,420 in Osaka at 8:05 a.m. local time. A third day of declines for the equity gauge today would cap its longest losing streak since November. Australia’s S&P/ASX 200 Index (AS51) gained 0.4 percent and New Zealand’s NZX 50 Index advanced 0.3 percent.

“With investors now having digested the news from the Bank of Japan and Prime Minister Shinzo Abe that Japan will stimulate its economy later this month, the yen has now appreciated against all but one major trading pair, showing that more may need to be done to hold the currency down,” said Evan Lucas, a Melbourne-based markets strategist at IG Markets Ltd., a provider of equities, currencies and commodities trading services.

Election Boost

The Nikkei 225 (NKY) surged 21 percent though yesterday from Nov. 14, when Japanese elections were announced, on expectations Abe’s new government would call for more stimulus. The yen tumbled 12 percent over the past three months, the worst performer among the 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Indexes. That boosts the earnings outlook for Japanese companies that repatriate profits back to Japan. The yen strengthened today to 86.95 per dollar.

The MSCI Asia Pacific Index (MXAP), the regional benchmark, climbed 14 percent in 2012 as central banks from the U.S., Europe, Japan and China took action to spur economic growth. The gauge is traded at 14 times estimated earnings, compared with 13.1 times for the Standard & Poor’s 500 Index and a multiple of 11.9 for the Stoxx Europe 600 Index, according to data compiled by Bloomberg.

Futures on the S&P 500 Index were little changed today. The gauge lost 0.3 percent yesterday as investors awaited results from Alcoa Inc. to unofficially start the corporate earnings season. Alcoa, the largest U.S. aluminum producer, rose in after-hours trading as sales beat estimates.

The Bloomberg China-US Equity Index (CH55BN) of the most-traded Chinese shares in the U.S. dropped 1.2 percent to 99.58 yesterday in New York.

To contact the reporter on this story: Adam Haigh in Sydney at ahaigh1@bloomberg.net

To contact the editor responsible for this story: Nick Gentle at ngentle2@bloomberg.net