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Despite the ruling Liberal Democratic Party’s victory in Sunday’s Upper House election, the yen remains under downward pressure.

At the ballot box, voters gave Prime Minister Junichiro Koizumi a mandate to press forward with painful structural reforms.

Although the moves of the LDP faction led by former Prime Minister Ryutaro Hashimoto, as well as other factions, remain unclear, economic restructuring measures are widely expected to force a further delay in Japan’s economic recovery.

Against this backdrop, the Nikkei average plunged to a 16-year closing low again Monday, raising fears that it would soon fall below the 10,000 level.

With few buying incentives in sight, foreign investors have turned net sellers of Japanese stocks in recent weeks, while the nation’s web of cross-shareholdings has continued to unravel. U.S. economic prospects also remain clouded.

Official figures showed late last week that U.S. gross domestic product grew at a seasonally adjusted annual rate of 0.7 percent in the second quarter, the slowest pace in eight years and three months.

Thanks to an interest rate cut by the U.S. Federal Reserve last month, the sixth this year, consumer spending managed a marginal rise.

However, fixed investment by U.S. businesses, another main driving force behind the economy, dwindled.

In his testimony to the House of Representatives Financial Services Committee, Fed Chairman Alan Greenspan gave a downbeat assessment of the economy, calling into question a widely anticipated economic pickup in the second half of the year.

Still, market participants are more concerned about the bleak outlook for the Japanese economy and fears of a negative impact of the economic restructuring.

The administration of U.S. President George W. Bush, apparently worried about a flight of money, remains committed to a strong dollar policy. With a strong dollar remaining in the national interest of both Japan and the U.S., the yen appears likely to give up further ground against the dollar.

Japanese institutional investors may also soon gear up for increased purchases of foreign securities again.

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