A buying frenzy sent Tokyo share prices forging ahead in recent weeks, lifting the key Nikkei average back above the 11,000 level.
The market benchmark leaped roughly 20 percent in just a couple of weeks, a development rarely seen in recent years.
The Nikkei average of 225 leading stocks soared 638.22 points to end at 11,450.22 on March 4 and has since repeatedly reclaimed the 12,000 level on an intraday basis, a level unseen since early August.
Tightened government controls on short selling set off a flurry of activity to cover short positions on the market late last month.
Investors who had sold borrowed shares in anticipation of buying them back at a lower price were forced to unwind their short positions at losses.
Recent favorable U.S. and Japanese economic data also helped lift investor sentiment.
The resultant high-priced activity enticed domestic institutional investors and foreign investors to move in.
Thanks to the steep runup in share prices, corporate investors have seen much of the latent losses on their equity holdings for the past year evaporate.
As often seen in the past, however, government efforts to keep share prices afloat artificially carry big risks.
After firms close their books on the year ending on March 31, Tokyo shares may face fresh selling pressure.
It is feared that the administration of Prime Minister Junichiro Koizumi will now drag its feet on structural reforms, leaving crucially weak spots in the financial system unaddressed — a scenario certainly most bearish for the Tokyo market.
The Government Pension Investment Fund has announced that it will earmark 1.7 trillion yen for investment in domestic stocks in fiscal 2002, up from 1 trillion yen for the current fiscal year.
The strong pickup in the flow of money from the government fund will no doubt have a positive impact on the market, but it remains to be seen how long the so-called price-keeping operation will continue to play a major role in daily market activity.
The bull run may continue for a couple of months, but there appears a good chance that much of the uptrend will run out of steam by the time the World Cup soccer finals kick off late in May.
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