Some bank issues rose limit-up on the Tokyo stock market last week on heightened expectations of progress regarding the disposal of bad loans held by Japan’s banks.
This optimism followed the release of policy guidelines put together by the Council on Economic and Fiscal Policy in order to revive the economy.
The Tokyo market as a whole remains weak, however, reflecting concern over domestic economic activity and corporate earnings, as well as lower U.S. stocks and subsiding optimism toward the administration of Prime Minister Junichiro Koizumi.
The market is likely to stay weak until fall, when economic fundamentals — including orders won by manufacturers — are expected to improve.
New York stocks are unlikely to bottom out soon amid uncertainty over the U.S. economy and corporate earnings prospects. The U.S. economy is forecast, nevertheless, to start recovering in the second half of this year thanks to various policy measures, including credit-easing by the Federal Reserve.
Last week’s data showing a fall in Japan’s January-March gross domestic product may have been due to weaker-than-real estimates on consumer spending caused by technical problems.
There’s a good chance that corporate earnings will pick up in the fiscal second half, and that the Tokyo market will then turn gradually up.
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