Japanese investors cross fingers for soft US inflation data

Investors in Japan and around Asia will be pinning their hopes on benign US inflation data next week following recent stock plunges sparked by fears of rising interest rates, analysts said Friday.
For the week ending June 9, the Tokyo Stock Exchange's benchmark Nikkei-225 index tumbled 1,038.47 points or 6.58 percent to 14,750.84 in tandem with other global markets.
The index nose-dived over three percent on Thursday alone, crashing below 15,000 points for the first time for six months on fears that higher US interest rates will slam the brakes on global economic growth.
The broader TOPIX index of all first-section shares fell 107.43 points or 6.69 percent over the week to 1,498.68.
"The key for the stock markets next week will be US inflation data," said Hiroyuki Nakai, chief strategist at Tokai Tokyo Research Centre.
US producer and consumer price data are due next week which investors will pounce on for leads on the likelihood of further rises in US interest rates following a spate of hawkish comments from top Federal Reserve officials.
"The best scenario for the markets is for weaker inflation data (to raise) expectations that the Fed will pause in raising interest rates," he said.
The recent rout in global stock markets has been sparked by worries over US inflation and slowing growth triggered by remarks from Fed chairman Ben Bernanke and his colleagues suggesting a hard line on inflation, dealers said.
"Share prices will be sensitive to economic indicators and Fed officials' comments following a weakening of market sentiment," said Toshihiko Matsuno, senior strategist at SMBC Friends Securities.
"But as both US and Japanese share prices seem to have hit the bottom, they are expected to rebound, although not at the same speed at which they plunged," he said.
Matsuno expects that the Nikkei-225 index will show volatile movement next week within a range of 14,300 and 15,300 points.
Nakai of Tokai Tokyo Research Centre forecast the index will stay between 14,000 and 15,500 points. He said market was worried that a US economic slowdown will sap Japan's economy due to the close trade links.
On the home front, dealers will be turning their attention to a press conference by Bank of Japan governor Toshihiko Fukui Thursday after a policy meeting at which zero interest rates are widely expected to be maintained.
"There will be no change in the BoJ's zero interest rate policy this month, nor in July or August," said Nakai, noting that the recent stock market plunge had reduced expectations of an imminent rate hike.