Japanese share prices are likely to enjoy solid support in the coming week as the US market continues its rally and the yen stays low against the dollar, dealers said Friday.
"The pace of recovery from the global slump in the spring was very slow in Japan. Now, a lot of players are trying to catch up from the delay, which will be seen next week as well," said Masatoshi Sato, senior strategist at Mizuho Investors Securities. "The market is likely to try this year's high anytime in the short term," he said.
For the week to June 15, the Tokyo Stock Exchange's Nikkei-225 index of leading shares jumped 192.4 points or 1.08 percent to 17,971.49. The broader Topix index of all first-section shares gained 16.75 points or 0.95 percent to 1,772.94.
Japanese brokerage houses expected the Nikkei index to firm in the coming week, possibly above the 18,000 psychological resistance mark, thanks largely to a solid performance on Wall Street. Nomura Securities expected the Nikkei to move between 17,600 and 18,100, while Daiwa Securities SMBC said the headline index could try 18,300, with high-tech shares looking promising. Optimism for the outlook of the US economy was also boosting investor confidence, said Toshikazu Horiuchi, head of Cosmo Securities' equity division.
"Now that the US economy appears to be stronger than previously expected, market momentum is more positive in Japan," he said. "The yen's depreciation is also a positive element. Export-related issues will benefit if the yen continues to be at this level."
Japanese exporters benefit from a weak yen, which makes their goods more competitive overseas and boosts repatriated earnings. The yen traded Friday near four-and-a-half year lows against the dollar after Japan's central bank unanimously kept super-low interest rates unchanged. Market participants' focus next week will be on US housing data as well as other figures from the Federal Reserve system's regional banks, dealers said.
Rises are also seen on other Asian markets, such as Hong Kong and Shanghai, which could boost momentum in Tokyo, analysts said. Stability in the international bond markets could also further buoy the stocks markets, said Yumi Nishimura, manager of investment advisory at Daiwa Securities SMBC. "There will not be too many major events and data slated for the coming week. The markets' focus is likely to be whether interest rates show signs of stability," she said.