Share prices on the Tokyo Stock Exchange will likely edge up this week, spurred by the surprise U.S. credit easing and the yen’s weakness against the dollar.
The upside, however, will be limited due to selling by Japanese firms to unwind cross-shareholdings ahead of annual account settlements in March.
The benchmark 225-issue Nikkei Stock Average is expected to move between 13,300 and 14,300 this week, after closing at 13,867.61 Friday, up from 13,785.69 a week earlier.
The U.S. Federal Reserve’s policy-setting Federal Open Market Committee convened an emergency meeting Wednesday and cut the federal funds target rate by 0.5 percentage point to 6 percent. The Fed also cut the official discount rate by 0.25 point to 5.75 percent.
The technology-heavy Nasdaq composite index leapt 324.83 points, or 14.2 percent, to close at 2,616.69 Wednesday, while the Dow Jones Industrial Average of blue chips rose 299.60 points to finish at 10,945.75.
The rise in the Nasdaq index was the highest on record in both point and percentage terms.
The Fed further lowered the discount rate Thursday by another 0.25 point to 5.5 percent.
“The decision by the Federal Reserve increased the feasibility of the soft-landing scenario for the U.S. economy, from which the Japanese equity market will largely benefit,” said Hiroichi Nishi, head of the products group at Nikko Securities Co.
Some market players expect that the U.S. central bank may cut the federal funds target rate again at the next regular FOMC session, scheduled on Jan. 30-31, he said.
On Friday, the Dow lost 250.40 points, or 2.3 percent, to end at 10,662.01 while the Nasdaq index fell 159.18 points, or 6.2 percent, to close at 2,407.65.
Kazunori Jinnai, head of the equity department at Daiwa Securities SB Capital Markets Co., said the yen’s depreciation against the U.S. dollar will be another factor supporting Japanese stocks as it is expected to boost exporters’ earnings.
“The current deterioration in business confidence was brought about by a slowdown in the U.S. economy, which raised concerns that Japanese exports to the United States may fall,” Jinnai said. “The yen’s cheapening against the dollar will help the Japanese economy on both the macro and micro levels.”
The dollar shot up against the yen in Tokyo on Friday to break the 116 yen barrier for the first time since July 1999.
Traders said, however, it is unlikely Japanese stocks will rise sharply as corporate unwinding of cross-held shares is expected to accelerate toward book-closings March 31.
Nishi said deregulation and structural reforms in the Japanese economy are key to a full-fledged recovery in stock prices.
Average daily trading volume on the Tokyo Stock Exchange this week was 415.62 million shares on the main section, up 57.19 million shares from a week earlier.
Nippon Steel topped all issues in volume terms and closed the week at 189 yen, unchanged from last week, on turnover of 17.24 million shares.
Second was Toshiba, closing this week at 770 yen, up 6 yen, on 15.22 million shares traded.
Mitsubishi Electric came in third, ending the week at 752 yen, up 49 yen, on a volume of 15.18 million shares.
NEC was fourth, closing at 2,195 yen, up 105 yen, on 13.47 million shares traded. Tokyo Gas ranked fifth and closed the week at 329 yen, down 9 yen, on 12.87 million shares traded.
The next five leading shares in terms of volume were Hitachi, Nomura Securities, Nissan Motor, Sakura Bank and Bank of Tokyo-Mitsubishi.