The Nikkei 225 had a positive week, up a modest 1% to 14,489.44, its highest close since early January, but fell short of its calendar year high of 14,691. Remember, keeping things in perspective is important because the N225 opened the year at 15,155 and was trading 18,000-plus last year. In spite of recent resiliency in Japanese equities, it looks like this week will be a tough one, starting with a big gap down on Monday and external factors as well as domestic economic data all putting potential downward pressure on stocks.

First, weak jobs data in the U.S. on Friday and an unprecedented two-day jump in oil futures sent U.S. stocks sharply lower. Nikkei 225 futures in Chicago lost 510 points to settle at 14,065. By comparison, the Osaka close was 170 points to the upside at 14,520. It was a sea of red for Japanese ADRs and Japanese ETFs trading in the U.S. Among the funds, only the CurrencyShares Japanese Yen Trust (FXY: 95.04 +0.95%) and UltraShort MSCI Japan Proshares (EWV: 70.64 +6.52%) posted gains, with the latter up over 6.5%. The most heavily traded ETF, iShares MSCI Japan Index (EWJ: 13.34 -3.54%) fell 3.5%, losing its momentum to recover the $14-level.

Within Japan, the Bank of Japan [BoJ] meets Thursday and Friday — don’t expect anything but the status quo, but watch out for post-rate decision commentary from BoJ Governor Shirakawa. SQ is Friday. Jumping around here, economic indicators from April will be released by the Cabinet Office on Monday, followed by April machinery orders on Tuesday and revised Q1 GDP and May corporate goods price index on Wednesday.

As of Friday’s close the N225 is trading at 16.9x trailing and 17.3x forward earnings, 1.70x book, 1.43% trailing yield and 1.51% forward yield. By comparison, TOPIX (1st Section) is trading at 18.2x trailing and 17.5x forward earnings, 1.58x book and 1.61% trailing yield and 1.67% forward yield.

In recent weeks we’ve been watching the 25 DMA of Topix-1 advancers/decliners, which eased again, to 111.2 on Friday. It has consistently been trading in triple-digit territory, 110-plus for a string of weeks now and was as high as 126.5 three weeks ago. Nonetheless, despite Friday’s positive close for indices, Topix-1 decliners nearly doubled the number of advancers, although 193 new highs were recorded compared to only 11 new lows.

Last 5 posts by Steven Towns

• Leaderless, Japanese stocks suffer in typical fashion in September - September 2nd, 2008
• Milking Mitsubishi UFJ - August 18th, 2008
• The Nikkei’s Losing Streak in Focus: No Plunge Protection Needed (EWJ) - July 6th, 2008
• Nikkei Weekly Outlook: Just Wait Until Friday (EWJ) - June 23rd, 2008
• Nikkei Weekly Outlook: Eyes on I-banks, Inflation, Yen (EWJ) - June 15th, 2008