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Tokyo stocks remain mired at a depressed price level.

Although the Tokyo Stock Exchange bottomed out March 5, when the benchmark 225-issue Nikkei average hit a 16-year closing low of 11,819.70, the market has yet to stage a strong rally.

The market may remain in a corrective phase for some time, with the key market gauge repeating small ups and downs.

Given that only a few months have passed since the market hit a low after the bursting of the late-1980s economic bubble and that the recession continues amid the stock price falls, it is almost impossible to expect dampened investor sentiment to improve quickly.

When the Tokyo stock market hit postbubble lows between 1998 and 1999, it took some six months to start an earnest rally after bottoming out.

The market accumulated energy during the waiting period and the Bank of Japan’s “zero-interest-rate” policy triggered its explosion.

Investor sentiment is so weak at present that an equally strong trigger is needed to cause a market rally.

As in the past, the market appears likely to turn upward six months after it bottomed out in March.

In other words, its rally will begin sometime between late July and August.

What will trigger the explosion of accumulated energy this time?

As uncertainty about Japan’s economic outlook has increased following the release of weak gross domestic product data for the January-March period, measures to prop up the economy are necessary.

Specifically, calls for a supplementary budget and a further quantitative easing of monetary conditions are expected to increase.

The market will begin an earnest rally only when these measures are taken.

In the meantime, the administration of Prime Minister Junichiro Koizumi will become more confident after the House of Councilors election in July and clarify its structural reform targets by this fall.

Because the government is expected to complete a series of measures to eliminate the adverse effects of the burst bubble this year, the stock market will surely come to the threshold of a new era.

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