TOKYO Japan's Nikkei share average slipped on Monday, led by exporters as the yen strengthened on mounting expectations that the Federal Reserve would launch further stimulus measures after weaker-than-expected U.S. jobs data.
Expectations of another round of quantitative-easing bond purchases by the Fed weighed on the dollar against the yen, hurting Japanese exporters' competitiveness even though more stimulus could help boost demand for their products. The Fed will next hold its policy meeting on September 12-13.
Exporters suffering included Canon Inc (7751.T), Nissan Motor Co (7201.T), Nikon Corp (7731.T) and TDK Corp (6762.T), down between 0.3 and 2.8 percent.
Construction machinery makers Komatsu Ltd (6301.T) advanced 2 percent and Hitachi Construction Machinery Co Ltd (6305.T) gained 2.7 percent, extending Friday's sharp gains after China had approved 60 infrastructure projects worth more than $150 billion as it looks to energize an economy mired in its worst slowdown in three years.
The Nikkei .N225 eased 0.3 percent to 8,848.35 after rallying 2.2 percent on Friday, its biggest one-day percentage gain in five months, on the back of the European Central Bank's plan to buy bonds of highly-indebted euro zone countries to tackle the bloc's debt crisis.
"People are still worrying about a slowdown in the real economy. Central bank policies are behind the curve. That kind of concern is casting a shadow over the market," said Kyoya Okazawa, head of equities and commodity derivatives at BNP Paribas in Tokyo.
"Hedge fund performance year-to-date is tough compared to the real index like the S&P, so potentially more redemption is coming this year. November is an important fiscal year-end for hedge funds. If hedge funds raise more cash to prepare for redemptions, I will not be surprised," Okazawa said.
The Nikkei is up 4.7 percent so far this year, underperforming a 14.3 percent rise in the U.S. S&P 500 .INX and a 11.4 percent gain in the STOXX Europe 600 .
However, Japanese equities offered a cheaper valuation, with its 12-month forward price-to-book ratio of 0.84, much lower than the S&P 500's 1.9 and the STOXX Europe 600's 1.3.
The broader Topix .TOPX added 0.1 percent to 735.74 on Monday.
Mitsubishi Paper Mills Ltd (3864.T) climbed 4.8 percent on short-covering after the stock unexpectedly kept its place in the Nikkei index during a review of the benchmark.
Mitsubishi Gas Chemical Co Inc (4182.T), which was earlier expected to be promoted to the benchmark, shed 5.2 percent after failing to be included.
(Editing by Eric Meijer)