Japan shares likely under pressure next week

Japanese stocks will likely remain under pressure next week after banking shares dived on a suggestion financial institutions will have to waive loans to Tokyo Electric Power (TEPCO), dealers said Friday. Japan's government on Friday announced a scheme for rescuing embattled TEPCO to ensure the payment of compensation to tens of thousands of people affected by the crisis at its stricken Fukushima nuclear plant.
However, some analysts complained about uncertainty as to how the scheme will work given that no compensation amount has been presented. Top government spokesman Yukio Edano said the public would not accept government financial support for TEPCO unless banks waive some pre-quake loan terms, triggering a sell-off in banking sector stocks.
"I don't think the Japanese public would possibly show support" for an injection of public funds into TEPCO without a debt waiver of pre-disaster bank loans, said Edano, the chief cabinet secretary.
It was the first time that a senior government official suggested a debt waiver for TEPCO.
"The banking sector will likely remain under selling pressure over speculation about a loan-waiver for TEPCO," said Hirokazu Fujiki, strategist at Okasan Securities. "Investors' sentiment is expected to be weak overall next week as a decline in the banking sector is likely to affect the entire market."
Hideyuki Ishiguro, an investment strategy supervisor, also at Okasan Securities, said the banks would have no choice but to waive their earlier loans for TEPCO if required to do so by the government.
"Without the government support, TEPCO would be crushed by debt sooner or later," Ishiguro told Dow Jones Newswires.
"If TEPCO fails, banks would lose everything. Banks would thus have no choice but to accept that (waiver) if asked by the government."
In the week to May 13, the benchmark Nikkei index at the Tokyo Stock Exchange lost 210.43 points, or 2.13 percent, to 9,648.77.
The Topix index of all first section shares also fell 16.56 points, or 1.93 percent, to 839.94.
For next week, Fujiki said: "The energy sector is expected to fluctuate as speculative movements are likely to emerge again. The market is expected to try to confirm downside support as players are likely to avoid taking risks."
He added that the market focus will be on US Federal Reserve chairman Ben Bernanke's speech, Fed minutes, and Japan first quarter gross domestic product data next week.