Japan's Nikkei bucks the trend as G7 holds line

LONDON Once again, Japan's stock market led the way Monday after representatives from the world's leading industrial economies refused to criticize the super-easy monetary policy of the Bank of Japan and the massive depreciation in the value of the yen it triggered.

The Nikkei's advance on Monday contrasts with the performance of much of Asia and a downbeat morning session in Europe. Investors elsewhere have been spooked by some moderately disappointing retail sales and industrial production data from China, the world's second-largest economy.

"The Chinese figures this morning weren't the end of the world, they were only marginally below market expectations," said Craig Erlam, market analyst at Alpari. "However, we've just had a four-day winning streak in most European indices, so investors will have been looking for an excuse to lock in profits."

Stocks have gained a lot of ground this year on a combination of reasons, including hopes over the U.S. economy, a seeming easing in Europe's debt crisis and continued support by the world's leading central banks. Many indexes, including Germany's DAX and the Dow in the U.S., have struck a series of all-time highs in recent weeks, while others such as the Nikkei have hit multi-year peaks.

On Monday, the DAX fell 0.7 percent to 8,222 while the FTSE 100 index of leading British shares was down 0.3 percent at 6,405. The CAC-40 in France was 0.5 percent lower at 3,936.

Wall Street was poised for a retreat at the open, with Dow futures 0.3 percent lower and the broader S&P 500 futures down 0.4 percent.

The focus of attention later will likely hinge on monthly U.S. retail sales figures for April, a key component of the U.S. economy. Investors are largely positive that the U.S. economy is gaining traction, particularly in the jobs market, following a brief swoon.

The dollar's fortunes over the day could hinge on the figures. Ahead of their release, the euro was down 0.2 percent at $1.2975.

Earlier in Asia, the Nikkei was in focus as it jumped to its highest close in more than five years after global finance leaders effectively backed the Bank of Japan's stimulus program as a legitimate attempt by the country to get out of its two-decade era of stagnation.

Prime Minister Shinzo Abe, elected late last year on promises to revive the world's third-largest economy, has implemented a policy mix of increased public spending and aggressive monetary easing.

One byproduct of the policy has been a sharply lower yen as traders price in the expectation of more money in circulation. For Japan, that's a potential growth boon as it makes exports cheaper; also for a country that's seen prices fall for much of the past 15 years or so, a falling yen is positive as it makes imports more expensive.

On Monday, it rose 1.2 percent to 14,782.21, its highest close since December 2007. The index has soared more than 42 percent since the beginning of the year.

The yen has fallen an equivalent amount over the past few months. Last week, the dollar rose above 100 yen for the first time in over four years. On Monday, the dollar was down 0.2 percent at 101.56 yen but earlier -- during Asian trading hours -- it had risen above 102 yen.

Japan was a main talking point at a weekend meeting financial representatives from the Group of Seven leading developed economies. All refrained from criticizing the Bank of Japan's policy, and accepted that the motivation was to get demand growing, not to weaken the yen.

However, with U.S. Treasury Secretary Jacob Lew indicating that he's monitoring developments with regard to the yen, the issue may be revisited at the wider G-20, when the leading industrial economies are joined by developing nations.

"This accepting tone could well change if the yen were to decline further which seems likely and is unlikely to be the end of the matter, especially if China and South Korea become more vocal with their concerns about the yen's rise and its effects on their exports," said Michael Hewson, senior market analyst at CMC Markets.

Elsewhere in Asia, Australia's S&P/ASX 200 rose 0.1 percent to 5,210.30 and South Korea's Kospi rose 0.2 percent to 1,948.70. Hong Kong's Hang Seng fell 1.4 percent to 22,989.81.

Mainland Chinese shares were mixed as government data showed slightly smaller-than-expected increases in industrial production and retail sales in April. The Shanghai Composite Index fell 0.2 percent to 2,241.92. The smaller Shenzhen Composite Index rose 0.3 percent to 974.20.

Oil prices tracked equities lower, with the benchmark New York rate down $1.17 to $94.87 per barrel in electronic trading on the New York Mercantile Exchange.