The Tokyo stock market remains caught between crosscurrents stemming from expectations of the positive effects of Prime Minister Junichiro Koizumi’s reform initiative and fears of further deterioration in the prospects for economic and corporate earnings.

A broad array of issues fell sharply yet again on the Tokyo Stock Exchange at the start of this week, taking the benchmark 225-issue Nikkei average to its lowest level in nearly 17 years.

Specifically, the Nikkei average ended at 11,257.94 Monday, its lowest close since Dec. 11, 1984.

The Topix index of all first section issues then ended at 1,155.15, its lowest since March 8, 1999.

The tumble in New York share prices spilled over into Tokyo and elsewhere.

With no sign of a U.S. economic recovery, further volatility appears inevitable.

I assume that the Nikkei average will move between 10,700 and 11,800 in the near term.

Selloffs early this month were triggered by downward revisions of profit projections by big-name electronics manufacturers, and high-tech issues also came under severe selling pressure.

Another key downside factor has been the implementation from the current business year of mark-to-market accounting rules on cross-held shares.

As the September end of the fiscal first half draws near, banks and corporate investors have stepped up sales to unwind cross-shareholdings.

Following a recent government report showing further economic deterioration, the April-June gross domestic product data due out Sept. 7 could offer fresh evidence of economic stagnation.

In its monthly economic report released on Aug. 10, the Cabinet Office downgraded its view of the economy for the first time in two months.

As of Aug. 10, major manufacturing companies were forecasting a 4 percent decline in consolidated pretax profits on average for the year to March 31, compared with a 3.6 percent fall projected in June.

Listed companies as a whole now expect the first profit fall in three years.

The market is looking for clues on whether corporate selloffs will subside at the start of the fiscal second half.

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