By V. Phani Kumar, MarketWatch HONG KONG (MarketWatch) -- Japanese exporters' shares struggled to shake off early losses Tuesday as lingering fears about sovereign debts in Europe and the euro's sharp depreciation against the yen kept some shares under pressure. The euro has tumbled 8.5% against the Japanese yen so far this year -- more than twice the U.S. dollar's 4.1% fall against the Japanese unit -- as growing public debt in European nations such as Greece, Portugal and Spain curbed risk appetite, sending safe-haven currencies such as the U.S. dollar and yen sharply higher. But the recent appreciation has taken the Japanese currency to much higher levels than several exporters had estimated in their earnings forecasts, raising fears that their repatriated earnings from Europe might be hurt. In Tuesday's trading, the euro was buying 122.23 yen in Asia, slightly more than the 122.16 yen it was buying in the previous session, but sharply lower than 133.57 yen it was fetching at the end of 2009. That compares with Toyota Motor Corp.'s (TM 72.85, -1.86, -2.49%) (JP:7203 3,280, -35.00, -1.06%) assumption of an average euro-yen exchange rate at 131 yen when it sharply raised its fiscal year earnings forecast last week. It's also higher than Toyota's estimate of 125 yen against the euro in the February-March period. Among other exporters, Canon Inc. (JP:7751 3,495, -55.00, -1.55%) (CAJ 38.87, -0.63, -1.59%) has assumed a euro exchange rate of 130 yen in its 2010 estimates, while Mazda (MZDA.Y 25.44, -0.64, -2.45%) (JP:7261 227.00, -6.00, -2.58%) has estimated the euro to trade at 127 yen in the current quarter. "We see the risk of earnings deterioration in Europe due to the recent rapid depreciation of the euro," J.P. Morgan analyst Kohei Takahashi wrote in a recent report on Mazda. "We estimate Mazda's annual operating profit forex sensitivity for each [yen per euro] swing at 1.5 billion yen." According to data from Japan's Ministry of Finance, more than 13% of Japan's exports in 2009 were shipped to western European countries, while Japan's trade surplus with that region contributed to nearly a third of the Asian country's overall trade surplus of 2.8 trillion yen ($31.16 billion) last year. Among exporters, shares of Canon declined 0.3% Tuesday, Bridgestone Corp. fell 0.4%, Mazda dropped 2.6% and Toshiba Corp. (TOSY.Y 28.10, -0.79, -2.73%) (JP:6502 423.00, -7.00, -1.63%) fell 2.6%. Toyota Motor ranked among gainers, meanwhile, on bargain buying after heavy recent losses due to its ongoing recall crisis. Read more on Toyota's Prius recall. The automaker's shares rose 3.5%, while Sony Corp. (SNE 33.01, -1.25, -3.65%) (JP:6758 2,973, -112.00, -3.63%) advanced 0.5%. Naomi Fink, strategist at Bank of Tokyo-Mitsubishi UFJ Ltd., said Japanese electronics makers were likely to be hurt the most by the euro's sharp depreciation against the yen, but the euro-yen exchange rate by itself was unlikely to hurt the Japanese economy. "It would only really make a difference for Japan if the yen were over-valued against everything, in which case overseas sales couldn't pull their weight in Japanese gross domestic product. Hard to make a case for this," she said. "Also, on a real effective exchange rate (REER) basis, the yen is still slightly under-valued, thanks to years of deflation. Finally, we can't discount the positive impact of yen strength on imports, which has shown up in GDP data," she added. In wider market activity Tuesday, Japan's Nikkei 225 Average slipped 0.2% to 9,929.26, dropping further after ending below the psychologically-important 10,000-point level for the first time in nearly two months on Monday. Other markets in the region were mostly higher. Australia's S&P/ASX 200 fell 0.4%, but China's Shanghai Composite rose 0.2%, Hong Kong's Hang Seng Index climbed 0.2%, South Korea's Kospi added 0.4%, India's Sensex rose 0.3% and Taiwan's Taiex jumped 2.1%.

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