With stocks locked in a crosscurrent between rosy expectations and bearish sentiment, activity has been subdued on the Tokyo stock market in recent weeks.

Investors are relieved that the government and the Bank of Japan have begun sounding optimistic about economic prospects and are elated at a reported rise in the money flow from public pension funds.

Yet, the upbeat note lacks strong conviction, with uncertainty surrounding the question of how heightened Mideast tensions and a runup in commodity prices will affect trading in the coming month.

With domestic demand remaining stagnant, manufacturing industries are finding it hard to pass along higher raw and intermediate materials costs to consumers.

Against this backdrop, Tokyo stocks may stay in a holding pattern for some time.

Still, worries remain over the government’s recent move to artificially buoy the stock market — a step that carries considerable risks.

Since the government tightened controls on short selling last month, hedge funds and other speculative traders have kept to the sidelines.

Once it becomes evident that a deep decline in share prices is in the offing, however, they will move in.

They now appear to be considering the timing of their return to the market.

There is talk that hedge funds are aiming to develop a computer program to circumvent the tightened controls.

Unnerving developments on the domestic political front are also casting a long shadow over the market.

The support rate for Prime Minister Junichiro Koizumi’s Cabinet has plunged below the disapproval rate, according to a newspaper poll.

The mad cow disease fiasco has also cast doubt on Koizumi’s political future.

The collapse of his administration would no doubt plunge the nation into political and economic instability.

Views are divided over U.S. corporate earnings and economic prospects, too.

All told, however, optimism on domestic economic prospects could keep stock prices from tumbling in the near term. But given a lack of strong morale boosters, the market could keep struggling to find its way for some time.

The market is looking for a clue as to when it may see light at the end of the tunnel.

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