The Japanese stock market will close the volatile year early next week with eyes on exchange rates after a recent surge in the yen, dealers said Friday. Over the week to December 26, the benchmark Nikkei-225 index rose 151.00 points or 1.76 percent to end at 8,739.52. But, for the year, the Nikkei has tumbled 42.91 percent as the global economic crisis takes its toll on Japan.
The broader Topix index of all first-section shares gained 12.15 points or 1.46 percent during the week to finish at 846.58.
The Tokyo stock market will close the year after the morning session on Tuesday and reopen on January 5. With trading due to be thin next week, dealers were looking to major events coming up in early January, such as US job data and rate decisions in Europe.
"There can be another wave of tough news anytime early next year," said Hirokazu Fujiki, a strategist at Okasan Securities. "Players will be restless as they ring in the new year." Dealers said market players were cautiously watching the foreign exchange rates during the long holidays.
The yen earlier this month soared to a 13-year high against the dollar, adding to the woes of Japanese exporters already hit by weakening demand. "We are watching out for risk factors pushing up the Japanese yen while share trading is closed," said Daisuke Uno, chief market strategist of Sumitomo Mitsui Banking Corp.
"One point we will focus on is whether the foreign exchange trading will repeat the same scenario of euro selling and yen buying, which we saw after September," he said. Okasan's Fujiki also said: "Players do not want to take long positions as they are still nervous about a rapid change in market sentiment during the holidays."
Looking ahead, Uno expected that markets will get a boost after US president-elect Barack Obama is sworn in on January 20 on hopes he can help revive the world's largest economy. But it remains to be seen how long the market bounce will last. "The Obama boost will have to come off at some point," Uno said.
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