Nikkei's Slide Continues, FOREX Hurts ETFs & ADRs (EWJ, ITF, VPL)

Japanese stocks seemed to be getting off to a good start Monday but everything fell apart in afternoon trading as a large selloff in June futures contracts pulled the Nikkei 225 Stock Average below a 16,000 yen close for the first time since March 8th. Long investors/traders in Japanese ETFs and ADRs are not going to appreciate the depreciation of the yen as the conversion rate nearly hit Y113/US$1 earlier today.

The Nikkei 225 has lost over 6.2% this month and is down over 9.7% from its April 7th multi-year high of 17,563.37.

As of Friday's close $14.48, iShares MSCI Japan Index ETF (EWJ) traded nearly 7% off its multi-year high close of $15.55 established on May 9th. In pre-market trading EWJ is down by 3%.

Setting FOREX and interest rates aside, it's disturbing to think that the Nikkei could trade any lower. In fact, it's trading below its 16,111 yen close at the end of last year. Granted Japanese stocks enjoyed a spectacular run-up in the second half of last year; even if all of the earnings were priced in at the of the year it doesn't make sense to be trading lower now because companies have met or beat earnings expectations and continue to forecast profitability although at a more conservative clip.

I'm sure there are plenty of bargain hunters waiting on the sidelines but there are far too many uncertainties that are keeping them on the sidelines.

EWJ, N225, USD/JPY 3-month chart: