Japanese market braces for further volatility

Japanese stocks face further turbulence this week with a rush of US earning releases set to determine whether a recent correction spurred by inflation worries has run its course, analysts said.
The Tokyo market endured a rollercoaster ride this week, reaching new four-year highs before sliding in tandem with US markets as inflation warnings from US central bankers set the scene for further interest rate rises there.
October is traditionally a weak month for stock markets, associated with the 1929 Wall Street crash and other market routs such as 1987's "Black Monday".
US shares tend to fluctuate in October because of the company results and the coming two weeks would bring a tough environment for Wall Street, said Toshio Sumitani, senior strategist at Tokai Tokyo Research Center.
"Japanese shares will be tracking US stocks this week," he said.
This week also sees the Bank of Japan's policy board gather for a two-day meeting with a decision due on Wednesday.
On the data calendar, machinery orders for August will be published on Tuesday.
But analysts say that the impact of Japanese indicators would be limited.
"US factors such as quarterly US corporate results will be key," said Ryuta Otsuka, strategist at Toyo Securities.
Leading US companies including Apple Computer and Advanced Micro Devices, will announce quarterly earning results.
Otsuka said that dealers here were likely to take their leads from overseas until the Japanese corporate results season gets into full swing in late October.
Sumitani expects the Nikkei-225 index to trade between 12,900 and 13,500 this week and Otsuka forecast between 13,100 to 13,500.
For the trading week ending October 7, the Tokyo Stock Exchange's benchmark Nikkei-225 index lost 346.56 points or 2.55 percent to 13,227.74.
The broader TOPIX index of all first section shares lost 39.76 points or 2.82 percent during the week to close at 1,372.52.
Bucking the generally weaker trend, Fuji Heavy Industries rose 101 yen or 19.69 percent over the week to 614 yen after Toyota stepped in to replace General Motors as partner of the Subaru-brand maker.
Toyota Motor lost 100 or 1.92 percent to 5,100 yen.