Japanese shares are likely to remain under pressure next week as investors wait for details of US President Barack Obama's plan to limit the size and scope of US banks, dealers said on Friday. "The plan on financial regulation will continue to weigh on the market" because details of Obama's initiative have not yet been announced, Nikko Cordial broker Hiroichi Nishi said.
"Share prices may face volatility depending how Wall Street fares," he said, adding that economic data and currency rates would also affect trade.
The Nikkei-225 index lost 391.55 points, or 3.57 percent, to 10,590.55 during the week to January 22. On Friday alone the Nikkei slid 2.56 percent. The broader Topix index of all first-section shares fell 25.46 points, or 2.63 percent, over the week to 940.94.
Obama's initiative, which needs to be approved by Congress, is aimed at limiting "excessive" risk taking. He said he wanted to put limits on banks to avoid a repeat of the financial crisis that sent shockwaves around the world. Hideaki Higashi, a strategist at SMBC Friend Securities, said Obama's plans, coupled with China's credit tightening, was discouraging investors.
"Funds are flowing out of risk assets globally. Caution is prevailing in the market especially because we still don't know details of the new regulation," Higashi said. Nomura Securities said in a weekly report that investors would also need to watch Japanese politics because a fund scandal embroiling ruling-party strongman Ichiro Ozawa is widening. Japan's government is to release data on December inflation, unemployment and industrial production on January 29 while companies will start next week announcing quarterly earning results. Shares in flagship carrier Japan Airlines fell to the rock-bottom price of one yen (one US cent) on Friday before closing at three yen, down from seven yen a week before. JAL filed for bankruptcy protection on Tuesday and unveiled plans to slash more than 15,000 jobs in an effort to stay airborne.
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