Japanese share prices may see volatile trading next week as investors wait nervously for key events, including a US interest rate decision, dealers said on Friday.
Shares extended a rebound over the past week in tandem with Wall Street on hopes of another rate cut by the Federal Open Market Committee (FOMC) on Tuesday and news of a White House plan to ease pressure on struggling US homeowners.
The Tokyo Stock Exchange's benchmark Nikkei-225 index gained 275.70 points or 1.76 percent to 15,956.37 over the week to December 7, after surging 5.3 percent the previous week.
The broader Topix index of all first-section shares rose 29.88 points or 1.95 percent to 1,561.76.
"Volatility is expected to be high because it's going to be an eventful week next week," said Norihiro Fujito, senior analyst at Mitsubishi UFJ Securities.
"In particular, close attention will be paid to the FOMC. Japanese share prices are expected to mirror the performance of Wall Street," Fujito said.
The benchmark Fed funds rate currently stands at 4.50 percent. Market views are divided on whether the central bank will cut rates by another 25 basis points or 50 basis points next week.
"A 25-basis-point cut is already factored in," Fujito said. An even bigger rate cut would underscore the US authorities' determination to ease concerns over the economic outlook, he added.
The Bank of Japan's "Tankan" survey of business confidence could also move the market on Friday, with investors concerned about signs that companies are growing reluctant to ramp up investment in new factories and equipment.
The Nikkei-225 hit a one-month high on Friday on news of the measures to try to ease problems in the subprime mortgage sector, but the index ended below the key 16,000 points level after late profit-taking.
Tokyo tracked Wall Street higher after President George W. Bush unveiled a plan to allow struggling US homeowners with subprime, or risky mortgages, to re-finance adjustable-rate loans or freeze their current interest rates for five years. "News of the US government plan to rescue some homeowners from the financial troubles they face is certainly a positive factor for share prices," said Seiichi Suzuki, market analyst at Tokai Tokyo Securities.
"But market participants have mostly factored in the news. There's a view that the plan announced by President Bush won't be a fundamental solution to the subprime loan problem," said Suzuki, who thinks that the Nikkei-225 is likely to end next week close to where it started.
Investors are also expected to track the performance of the yen next week after a recent weakening of the currency against the dollar that has helped ease worries about the outlook for Japanese exporter earnings.