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Although the Tokyo stock market is still in a bit of a corrective phase, a solid rebound appears to be in the offing.

Key downside factors in recent weeks were the volatility in U.S. stock markets and seasonal selloffs by Japanese companies ahead of the end of the fiscal year.

With the intricate web of cross-shareholdings unraveling, a broad array of stocks came under severe selling pressure, taking the benchmark Nikkei average below the 12,000 level on March 13 for the first time in more than 16 years.

The market may spend more time searching for direction before staging a strong rebound.

With worries about yearend seasonal factors out of the way, market forces of supply and demand may turn higher. I expect the Nikkei average to move between 12,400 and 14,500 in the near term.

Investors were relieved that early writeoffs of nonperforming loans by Japanese banks were a key topic at the March 19 Japan-U.S. summit in Washington.

The market also took comfort from the Bank of Japan’s recent decision to bring overnight interest rates effectively back to zero by setting a higher target for reserve requirements for commercial banks.

The BOJ has declared that it will keep the new policy intact until consumer prices stop falling.

The market is now awaiting a package of emergency economic measures to be announced this week.

Against this backdrop, a flow of money from pension funds and other institutional investors could soon pick up strongly, providing a major lift to share prices.

The return to the “zero-interest-rate” policy has also enticed individual investors to return to the market in search of potential gains.

Foreign investors, too, may soon step up purchases, counting on moves signaled by the government to help shore up the stock market.

On Wall Street, worries remain over downward revisions of corporate earnings and stock market prospects.

When those worries are put to rest, however, New York share prices will turn higher.

The Dow Jones industrial average appears to be heading in the short term to a 9,200-10,000 range, against 9,485.71 at Tuesday’s close.

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