Battered Japanese share prices are likely to face another week of volatility as worries grow about the impact of the financial crisis on the global economy.
They said the market will continue to take its cue from Wall Street, where investors were waiting on Friday for key US jobs data and a vote by the US House of Representatives on a revamped 700-billion-dollar Wall Street bailout.
Even if the plan is approved, "I'm not sure how effective it will be to calm the market," said Mizuho Investors Securities strategist Masatoshi Sato, noting that the root of the problem lies in the short-term credit markets.
Over the week to October 3, Tokyo's headline Nikkei-225 index plunged 955.02 points or 8.03 percent to end at 10,938.14, finishing below 11,000 points for the first time since May 2005.
The broader Topix index of all first-section shares tumbled 99.92 points or 8.70 percent to 1,047.97. Signs of worsening business confidence in the US and Japan suggest "people are worried that the credit crunch could harm the overall economy," said Sato.
So Friday's US jobs data "could move the market drastically," he said. But some market watchers saw room for a rally if there is good news from the United States.
"As the US financial package is likely to pass the House and Japanese stocks are already looking cheap, I expect share prices will rebound next week," said Hiroaki Hiwata, a strategist at Toyo Securities.
He sees the Nikkei moving in a range of 11,000-11,700 points. Investors will turn their attention to the Bank of Japan on Tuesday as policy-makers wrap up a two-day meeting on interest rates.
While the central bank is widely expected to leave its super-low rates on hold at 0.5 percent, investors will be watching for any signs that it is preparing to step up efforts to calm jittery markets.
The Bank of Japan has been pumping emergency funds into the short-term money market to try to stop credit flows drying up. An interest rate cut is still seen as unlikely in Asia's biggest economy, although some analysts believe such a move is possible if the economic situation continues to worsen.
"We do not expect the BoJ to take a pre-emptive action but believe the chances of a rate cut, depending on market conditions and overseas central bank moves, are rising," Morgan Stanley economist Takehiro Sato wrote in a note.
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