International Markets: Tokyo - Nikkei faces a rollercoaster ride

JAPANESE stocks are set to seesaw this week, rising on optimism that the government will take steps to stimulate the economy and falling on any turmoil in Asia. Bonds are likely to fall.

"The key factor will be Asia," says Pelham Smithers, a strategist at ING Baring Securities (Japan). "The position in Indonesia doesn't appear to be able to last seven days without a major step being taken."

The Indonesian rupiah plunged for a seventh day on Friday, falling 20 per cent against the dollar as several banks froze lending.

The Nikkei 225 index is likely to trade between 16,300 and 17,300 this week, traders say. The index gained 4.6 per cent last week to close at 16,789.11.

Supporting stocks and hurting bonds last week were hints from officials that Japan will drop its commitment to fiscal reform in favour of stoking the economy. Suggestions include higher spending on infrastructure and more income tax cuts.

"There's a significant amount of pressure on Japan to do something to boost domestic demand," says Cameron Umetsu, senior economist at UBS Securities. "It's no longer a question of if, but of what magnitude." Bond yields are likely to rise further in the days ahead, he said.

Last week the benchmark government bond yield, maturing in September 2005, rose 16 basis points to 1.805 per cent, its highest since 13 October.

More stimulus steps could be drawn up by 20 February, said a senior legislator in the ruling Liberal Democratic Party. The government's goal is to push the Nikkei back to 18,000, its level on 31 March, 1997. Some economists say the new measures may have limited impact, but the government is keen to boost the value of banks' stock portfolios.

Investors and traders are confident that the weak economy will keep interest rates low.

Economic indicators out in the week ahead aren't likely to alter the view that the economy is struggling, and will probably not influence bonds much. Last month's supermarket and department store sales figures are released on Monday. In November, supermarket sales fell 4.5 per cent on the month a year earlier, while department store sales fell 3.5 per cent.

The market is awaiting Thursday's release of December industrial production figures. Production is expected to have risen 1.3 per cent last month, after falling 5 per cent in November from October.

On Friday the government is expected to report that Japan's unemployment rate has risen to 3.6 per cent, a post-war high.

Copyright: IOS & Bloomberg

Start your day with The Independent, sign up for daily news emails
Arts and Entertainment
Billie Piper as Brona in Penny Dreadful
tvReview: It’s business as usual in Victorian London. Let’s hope that changes as we get further into the new series spoiler alert
Life and Style
A nurse tends to a recovering patient on a general ward at The Queen Elizabeth Hospital in Birmingham
Arts and Entertainment
No Offence
tvReview: No Offence has characters who are larger than life and yet somehow completely true to life at the same time spoiler alert
Chuck Norris pictured in 1996
ebooksA celebration of British elections
Arts and Entertainment
Sarah Lucas, I SCREAM DADDIO, Installation View, British Pavilion 2015
artWhy Sarah Lucas is the perfect choice to represent British art at the Venice Biennale
A voter placing a ballot paper in the box at a polling station
Arts and Entertainment
The Queen (Kristin Scott Thomas) in The Audience
theatreReview: Stephen Daldry's direction is crisp in perfectly-timed revival
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

SThree: Trainee Recruitment Consultant - Swiss Banking and Finance

£20000 - £25000 per annum + Uncapped commission: SThree: Can you speak German,...

Ashdown Group: Marketing Executive - 6 month FTC - Central London

£25000 - £30000 per annum + benefits: Ashdown Group: An exciting opportunity f...

Ashdown Group: Junior Project Manager (website, web application) - Agile

£215 per day: Ashdown Group: Junior Project Manager (website, web application ...

Guru Careers: Software Engineer / Software Developer

£40-50K: Guru Careers: We are seeking an experienced Software Engineer / Softw...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power