Fears for the global economy are expected to weigh on the Tokyo stock market again next week, with the benchmark index already near a five-month low, analysts said on Friday. Investors are likely to remain cautious with a raft of US and Japanese economic data due to be released.
Markets are also watching closely for signs the US government might bail out ailing mortgage finance giants Fannie Mae and Freddie Mac. Over the week to August 22, Tokyo's benchmark Nikkei-225 index lost 353.37 points or 2.71 percent to end at 12,666.04, the lowest close since April 1.
The broader Topix index of all first section shares on the Tokyo Stock Exchange fell 30.89 points or 2.48 percent to 1,216.42.
"There will be no dramatic change in the stock market in the coming week, with investors paying attention to key US data," said Tsuyoshi Segawa, equity strategist at Shinko Securities.
"It's hard to predict whether worries about the health of the US economy will recede," said Segawa, who expects the Nikkei to trade within a range of 12,570-13,000 points over the coming week.
Housing and economic growth figures are slated for release in the United States, while the Japanese government will publish statistics on inflation and industrial output. Investors will continue to monitor Fannie and Freddie, which underpin roughly 40 percent of US home loans and are rumoured to be in line for an emergency injection of public funds.
"If there's a bail out of Fannie Mae and Freddie Mac, that will be positive for the stock market," said Seiichi Suzuki, analyst at Tokai Tokyo Securities.
Even a glimmer of positive news might be enough to prompt buying following the recent heavy sell-off, he said, predicting the Nikkei would be within 12,600-12,858 points over the coming week. Investors will also be watching oil prices and any efforts by the US authorities to try to reduce the influence of speculators.
"If the discussion moves toward regulating hot money, that will be good for stock markets as oil prices will fall, which is good for the global economy," said Segawa.
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