The continued firmness of share prices in New York in recent weeks has helped the Tokyo stock market rebound.

It remains to be seen, however, whether Tokyo stocks have found their bottom.

Given the nation's bleak economic prospects and the continuing uncertainty over bad-loan disposals by domestic banks, further market volatility appears inevitable.

On Wall Street, the Dow Jones industrial average and other key market gauges have recouped more than they lost in the wake of the Sept. 11 terrorist attacks.

The strong showing in New York has allowed the Tokyo market to turn its attention back to internationally active blue-chip issues.

Long-battered banking issues have also rebounded strongly amid speculation the government will soon approve more public fund injections to help banks dispose of their nonperforming loans.

Investors have also taken heart from repeated remarks by state officials indicating they will allow the yen to fall to around 140 to the dollar.

It remains anybody's guess, however, how long Washington will remain committed to a strong dollar policy.

On Wall Street, expectations are mounting that corporate earnings are turning for the better, although this view is open to question.

In Tokyo, investors are fretting over the impact of the government's planned introduction of a limited deposit protection system.

The "payoff" system will guarantee only up to 10 million yen in deposit principal per client at a failed financial institution, rather than the full protection guaranteed under the current system.

Ahead of the system's April debut, banks are being forced to rein in new loans -- a cautious stance that poses a serious threat to the continued existence of many firms. The question now is how soon banks will finish disposing of nonperforming loans.

If worst comes to worst, many big-name firms could fail and the Nikkei average could fall under 10,000.

A further deterioration in land and property values and corporate earnings is putting the brakes on capital expenditure and is threatening to send the economy sliding into a deflationary spiral.

In short, the Tokyo market will struggle to find its way in the coming months.