The initial trigger for the Tokyo share price rally in recent weeks was foreign investors’ stepped-up purchases.

Their net purchases in April soared to 1.09 trillion yen, topping the 1 trillion yen level for the first time since June 1999.

What’s more, they bought 426.53 billion yen more than they sold in May’s holiday-studded first week.

The biggest apparent morale booster for foreign investors was the high public approval rating of the reformist Cabinet of Prime Minister Junichiro Koizumi.

Worries about a further U.S. economic slowdown have been put to rest, at least temporarily, allowing international investors to switch their attention to growing corporate earnings in Japan.

According to a Daiwa Institute of Research Ltd. survey, 12 leading electronic machinery manufacturers are forecasting a 31 percent increase in their pretax profits for fiscal 2002 in a turnaround from a 17 percent fall in the current business year.

They are suffering from a slump in demand for electronic machinery from the information technology sector in the current business year, but the market environment is expected to take a turn for the better in the coming year, with demand picking up for semiconductors and electronic parts and components.

The projection is based on the assumption that the yen will hold steady at around 120 to the dollar. Recent developments on the U.S. economic front are also encouraging.

With consumer spending picking up, a 2.1 percent U.S. economic expansion is expected for the April-June quarter on top of a 1 percent rise in the first quarter.

Daiwa Institute is forecasting continued growth of 3.1 percent in the July-September term and 4 percent in October-December.

U.S. interest rate cuts are having the desired effects.

Besides, U.S. manufacturers have begun working off stockpiles of unsold products, fueling expectations that U.S. industries will begin gearing up for increased spending on plants and equipment in the fall — a scenario that bodes well for Japanese exports.

The bill for introducing 401(k)-type pension plans, which is expected to clear the Diet shortly, could provide a major lift to the flow of money from investment trust funds into stock markets.

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