Tokyo shares may rebound on tail of US stocks, dollar

Japanese shares may stage a comeback next week after recent heavy losses but only if they get a positive lead from US stocks and the dollar, analysts said Friday.
For the week ending May 19, the Tokyo Stock Exchange's benchmark Nikkei-225 index lost 446.33 points or 2.69 percent to 16,155.45.
The index dipped below 16,000 points earlier in the week for the first time for two months but in the end managed to regain the symbolic level.
The broader TOPIX index of all first-section shares fell 49.61 points or 2.94 percent to 1,638.57.
"Japanese stocks will continue to be driven by external factors next week," said Ryuta Otsuka, strategist at Toyo Securities.
"If foreign exchange rates and US stock markets are stable, Japanese share prices are expected to recover to the 16,500 points level," he said. The dollar hit eight-month lows against the yen this week on worries over the huge US current account deficit and an expected narrowing of yield gaps.
However, the US currency recovered some lost ground by Friday, allowing the Tokyo stock market to end in positive territory for just the second trading day in the past nine.
The recent rapid appreciation of the yen has worried investors because of the negative impact on exporter earnings.
Otsuka said that overseas investors would play a key role next week.
"Another factor is whether there will be any respite in the sell-off by foreign investors, who dragged the stocks down recently," he said.
Japan will release trade statistics for April next week but the market will more likely focus on US economic indicators such as housing data for clues on the outlook for American interest rate hikes, Otsuka said. At home, major Japanese banks will announce their financial results for the fiscal year to March including Mitsubishi UFJ Financial Group, Mizuho Financial Group and Sumitomo Mitsui Financial Group.
"Banking shares are expected to be bought back as they have already been sold on weak (market) forecasts for this quarter," said Kazuhiro Takahashi, equity general manager at Daiwa Securities SMBC. "If foreign investors return, share prices are likely to test the 16,600 points level," he said.