Japan's Nikkei index may slide to 8,000 yen: SMBC

Companies have been able to improve earnings mainly because of cost reductions and a recovery in real product demand is yet to be seen, Nakanishi said. Should the economic climate become severe again, the Nikkei's high price-earnings ratio may be extinguished, said the strategist, whose firm is a unit of Sumitomo Mitsui Financial Group Inc., Japan's No. 2 lender.

“Share prices may head downwards,” Nakanishi said in an interview Tuesday. “It may drop below the 9,000 yen level and fall to 8,000 yen by February next year.”

The Nikkei 225 was little changed 9,871.68 as of the close in Tokyo. The gauge has fallen 7.2 percent from an 11-month high on Aug. 26 amid speculation the government will tolerate a stronger yen and will allow letting some borrowers delay repaying bank loans. Companies in the Nikkei are still valued at an average 37.6 times this year's profit, the highest of all major Asian indexes tracked by Bloomberg.

“It's at a level that can't be explained,” said Nakanishi.

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