Japanese stocks are expected to edge up this week, helped along by continued buying by foreign investors and maybe by earnings reports from tech heavyweights such as Sony Corp.
Consumer electronics giant Sony will join Fujitsu Ltd and Canon Inc and auto makers, including Honda Motor Co Ltd, in a barrage of earnings scorecards, mostly for the third quarter, October to December.
Japan's electronics makers are expected to post strong quarterly results, thanks to robust sales of digital appliances like DVD recorders, liquid crystal display (LCD) televisions and digital cameras.
"Investors will be keeping an eye on developments in the forex market, but the big focus of the week will be the major earnings reports," said Masaaki Higashida, deputy general manager at Nomura Securities' investment information department.
Traders said the Nikkei share average would probably move between 10,800 and 11,400, after rising 1.95 percent last week to 11,069.01.
The Nikkei, which hit a three month closing high of 11,103.1 on Tuesday, has been supported by foreign investors, who exchange data showed were net buyers of Japanese shares for the fifth straight week in the week ended on January 16.
But traders warned that, with tech shares in particular having already posted handsome gains so far this year, many investors would be looking to take profits on stocks that failed to beat market expectations for third-quarter earnings.
"I'd be taking a cautious stance this week because, as we've seen in the US, most of the good news is already reflected in stock prices," said Yutaka Miura, deputy manager of equity information at Shinko Securities.
Shares in US technology giants, including Lucent Technologies and Advanced Micro Devices Inc, tumbled last week even though both of those companies posted strong quarterly earnings.
The US Nasdaq Composite Index ended down for the first week in seven.
In Japan, Sony shares are up 20 percent so far this year, outperforming the Nikkei's 3.7 percent rise and spurred by news of strong sales of DVD recorders and other digital appliances over the year-end holiday period.
Many fund managers remain cool on the stock.
"There'll be no 'Sony shock' this time round, as expectations are still fairly low," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments, referring to a surprise $1 billion loss that Sony announced in April 2003.
"In terms of future strategy and the progress of restructuring, it's still a bit unclear where Sony is at right now."
Traders will also have an eye on foreign exchange markets, where a recent rise in the value of the yen threatens to eat into the overseas earnings of Japanese exporters.
The dollar was trading at around 106.7 yen on Saturday, well below the average break-even level of 111 yen to the dollar in a recent survey of large manufacturers by the government.
Analysts said investors would likely continue to focus on laggard domestic sectors such as construction and real estate, which are benefiting from Japan's mild economic recovery and are sheltered from the effects of a stronger yen.
The biggest sector winner so far this year is real estate, which has risen 16.4 percent, supported by recent data that showed Tokyo land prices were finally starting to bottom out after a 13-year slump.