The yen could remain under downward pressure for some time amid growing worries about economic and stock market prospects in Japan.

With the downtrend in Tokyo share prices continuing unabated, the benchmark 225-issue Nikkei average fell to its lowest level in more than 15 years last week.

There was talk that international credit rating agencies are considering lowering Japan's sovereign debt rating, a bearish scenario for the yen.

The dollar snapped out of the 115 yen-118 yen range Monday and now appears set to test still higher ground.

The greenback could run into some resistance when it approaches the 120 yen level, but, given its strong bull run in recent days, it now appears heading to a near-term range between 120 yen and 125 yen, though occasional volatility is inevitable.

With the end of the business year drawing near, nevertheless, the seasonal repatriation of funds by Japanese institutional investors to their home markets could weigh on the dollar.

Japanese export-oriented companies could also unload their dollar holdings as soon as they decide their in-house arbitrage exchange rates for the coming quarter.

The market is now keeping a close eye on developments on the political front.

Prime Minister Yoshiro Mori is expected to step down shortly and the shift in power will no doubt be a positive factor for the structural reform program under way in the nation and, hence, for the yen.

Still, a wave of speculative dollar selling ahead of the March 31 end of the year may prove to be a one-time event.

With signs of Japanese economic recovery and a strong rebound in share prices still nowhere in sight, the yen will remain under downward pressure.

The slowing U.S. economy is now casting a long shadow over Japanese economic prospects as well, making the yen look vulnerable. Yet, Japanese institutional investors' seasonal selloffs of foreign securities could help ease selling pressure on the yen.

The volatility on the TSE could force them to unwind their overseas portfolios before they close their ledgers on the year.

In short, the long-range direction for the yen remains unchanged -- downward.