Japanese share prices are headed for another volatile week as investors keep a nervous watch on events linked to the US subprime loan crisis, dealers said Friday.
Shares declined over the past week as investors remained skittish about a global credit squeeze despite a quarter-point US interest rate cut and a joint action plan announced by major central banks to shore up the financial system.
The Tokyo Stock Exchange's benchmark Nikkei-225 index lost 441.86 points or 2.77 percent to 15,514.51 over the week to December 14, after gaining 1.76 percent the previous week. The broader Topix index of all first-section shares fell 60.51 points or 3.87 percent to 1,501.25.
"Amid a shortage of market-moving events and fewer and fewer participants in the market ahead of holidays, volatility is expected to be high in the coming week," said Masatoshi Sato, a strategist at Mizuho Investors Securities.
"Share prices will depend on the subprime-linked problems," he said, noting that other factors such as movements in the yen now appear to be having less impact.
A weaker yen against the dollar generally has positive impacts on Japanese exporter earnings but the depreciation of the yen past the 112 per dollar level Friday "did not seem to have affected the market," he said.
Investors are likely to remain cautious about the domestic economy after the Bank of Japan said business confidence fell for the first time in three quarters amid a shaky global economy and rising costs.
But despite the cautious mood, major companies upgraded their plans for spending on new plants and equipment, allaying fears of cutbacks. Hiroaki Hiwata, a strategist at Toyo Securities, said the Tankan survey had largely been factored in by investors before the announcement and eyes were once again turned to the US.
"I think there might be some bargain hunting on individual shares with key events such as Tankan and the Federal Reserve meeting over," Hiwata said. The BoJ is due to meet on interest rates next week but markets do not expect another rise in Japan's super-low interest rates before mid-2008 at the earliest.
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