How to simulate mouse click events to key events ?

For eg: If I click left click of the mouse it should fucntion as left arrow of the key board.

Easily. At least in jdk1.1 event model.
Get the MouseEvent, create KeyEvent and send it via Component.processKeyEvent() method. You can play with any event types like this.
The example of case you described can be downloaded from http://druid.ml.org/~vps/Java/examples/Event.java.