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Although the Tokyo Stock Exchange ushered in 2002 on a positive note, a long lasting surge appears unlikely. The outlook remains bleak for the year ahead and beyond.

The trigger for the recent rebound was the back-to-back rise in New York share prices.

Investors also took comfort from the Bank of Japan’s repeated moves to ease its grip on credit and indicated government moves to allow further injections of public funds into ailing banks.

What’s more, there was talk that public pension funds have set aside more money for equity investments.

The euphoria could soon begin fading, however, amid concern over the increasingly cautious lending stance by banks — a major factor behind several recent business failures.

Late last month, Ishikawa Bank, a second-tier regional bank, filed for insolvency proceedings with the Financial Services Agency — the first Japanese bank failure in two years and as many months.

The news came at a time when the Tokyo stock market was under strain as financial institutions were assessing the impact of U.S. energy giant Enron Corp.’s bankruptcy and Argentina’s default on its international debt and devaluation of its peso.

As government officials have conceded, signs of economic recovery are not likely to become discernible until after the first half of fiscal 2003 at the earliest.

The assessment of fragile economic recovery is still based on the assumption that the nation’s exports will continue picking up, manufacturers will work off stockpiles of unsold products quickly and structural reforms will have the desired effects on the economy. In addition, banking institutions must clear their nonperforming loans.

All told, the market could come under severe selling pressure before listed companies close their ledgers on the current business year in March.

The benchmark 225-issue Nikkei average then could fall to around 8,000.

As always, nevertheless, the market’s deep slide will take a good number of shares down to attractive price levels, prompting investors to hunt for bargains.

Investors would then opt for shares of export-oriented companies that are expected to benefit from a weak yen.

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