Volatile trading expected in Tokyo stock market

Volatile trading is expected in the Tokyo stock market as market participants keep a close watch on a US interest rate decision and a Japanese leadership battle, dealers said.
They said, however, that the impact of Prime Minister Shinzo Abe's abrupt resignation on financial markets would be limited as players think Japan's policies are unlikely to change dramatically under the new premiership. Over the week to September 14, Tokyo's benchmark Nikkei-225 index inched up 5.26 points or 0.03 percent to 16,127.42.
The broader Topix index of all first-section shares fell 12.31 points or 0.79 percent to 1,544.71.
"All the eyes are on decision by the FOMC (the Federal Open Market Committee Meeting) next week," said Norihiro Fujito, a senior analyst at Mitsubishi Securities.
"Players, who refrained from taking positions, are likely to take the FOMC decision as a key cue for trading in the near term," Fujito said.
Most analysts expect a cut of 25 basis points in the federal funds rate of 5.25 percent but some say the Fed may make a more aggressive move if it sees recession risks mounting. "Volatility is expected once Fed signals its stance," Masatoshi Sato, senior analyst at Mizuho Investors Securities.
Brokers also said the market was digesting domestic political events as Yasuo Fukuda, a party elder with moderate policies, emerged as a front runner to succeed Abe.
"The political confusion has eased as Fukuda is now very likelly to succeed Abe," Sato said. "No matter who succeeds Abe, policies and the current political situation will not change dramatically," he said. "Unless foreign investors take the leadership change as an cue to sell, the impact will be limited."
Mitsubishi's Fujito also said: "The market has been unaffected by the recent political confusion, but sentiment may turn bearish if foreign investors see Fukuda's premiership as a sign of a slowdown in reforms."
The ruling Liberal Democratic Party is to hold its party presidential election on September 23 to elect a successor to Abe, who resigned on Wednesday following a raft of scandals and gaffes as well as a plunge in public support.