Bloomberg – Japanese stocks fell, with the Nikkei 225 Stock Average dropping into a bear market before an industry report which may show U.S. sales of existing homes plummeted in July, and as the yen strengthened.

Canon Inc., which receives 82 percent of its revenue from outside Japan, lost 2 percent. Mitsubishi UFJ Financial Group Inc., Japan’s biggest bank by market value, fell 1.4 percent. Softbank Corp., Japan’s only provider of Apple Inc.’s iPhone, declined 1.8 percent after Japan Communications Inc. said it will offer chips that let the smartphone access another network.

“The market is expecting the U.S. housing data to show bad results,” said Fumiyuki Nakanishi, a strategist at Tokyo-based SMBC Friend Securities Co. “And as concern about the U.S. economy grows and the yen continues strengthening, investors are having to wait on the sidelines.”

The Nikkei 225 Stock Average lost 1.1 percent to 9,018.23 as of 9:24 a.m. in Tokyo. The gauge is more than 20 percent below its 18-month high on April 5, the level some analysts regard as a bear market. The broader Topix index declined 0.9 percent to 817.50.

The Nikkei has fallen 15 percent this year, the most among benchmark indexes in the world’s five-largest developed countries, as the yen strengthened and Europe’s debt crisis and concern about slowing economic growth in China and the U.S. dented confidence in a global recovery.

U.S. Home Sales

Futures on the Standard & Poor’s 500 Index declined 0.4 percent. Yesterday, the gauge slumped 0.4 percent in New York as speculation the economy may slip into another recession offset investor optimism amid more than $1 trillion in takeovers this year.

A report today by the Chicago-based National Association of Realtors will show U.S. July sales of existing homes plummeted 12.9 percent from June, the biggest monthly loss of 2010, according to the median estimate of economists surveyed by Bloomberg.

New-home sales, which account for less than a 10th of housing transactions, stayed at the second-lowest level on record last month, economists predict Commerce Department data will show on Aug. 25.

The yen rose to as much as 85.05 against the dollar today in Tokyo from 85.37 at the close of stock trading yesterday. Against the euro, the yen climbed to as much as 107.40 per euro from 108.51. A stronger yen reduces overseas income at Japanese companies when converted into their home currency.

The yen climbed to a 15-year high against the dollar this month and is on course for its strongest annual average level since currencies began trading freely in 1971, according to data compiled by Bloomberg and based on each day’s close.

To contact the reporter on this story: Anna Kitanaka in Tokyo at akitanaka@bloomberg.net

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