International Markets - Tokyo: Stocks to get a push up

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The Independent Online
JAPANESE stocks may rise this week, led by builders and other low-priced shares, on expectations that the government will use public funds to push up the benchmark index. Bonds are likely to continue Friday's decline on concern about the scale of government generosity.

The government may commission trust banks to spend as much as Y1,000bn in postal savings and insurance funds by 31 March, when most Japanese companies close their books, Liberal Democratic Party officials said.

"It's obvious the government intends to do whatever it takes to drive up the index," said Yoshio Inamura, manager at Tokyo-Mitsubishi Asset Management. "Individual investors and dealers will be looking to pick up cheap shares and go along for the ride."

Steel makers will probably join in the rise even though industry leaders all revised earnings forecasts downward on Friday after the market closed. Nippon Steel Corp, the world's largest steel maker, cut its group net profit outlook by 66.7 per cent.

"The market knows these industries are hurting - more downward revisions are no surprises," said Mr Inamura. "Nobody will be looking at fundamentals anyway."

The Nikkei 225 index last week rose 1.78 per cent, to 17,131.97. Gains past 17,500 will probably be pared, however, by corporate shareholders selling to improve their balance sheets before book closing.

"The last four times the market has made a run past 17,000, it ran into pretty stiff resistance," said Nobuaki Kurisu, manager at Tokyo Investment Trust Management. "With the economy as bad as ever, profit-taking above that level is inevitable."

Japan's electronics exporters may fall after they received a double blow last week when US hi-tech giants Motorola and Intel announced earnings will fall below previous forecasts.

"The days of double-digit growth are over for the blue chips," said Mr Inamura. "With all the downward earnings revisions we're seeing, investors are keeping their distance."

Still, statements by politicians rather than corporate executives will remain the focus of market attention. "Everyone is waiting for the prime minister to it make clear that the government has shelved its deficit- cutting programme to give top priority to economic recovery," said Shigemi Nonaka, a managing director at Sakura Asset Management. "If he does that, the government won't even need to spend Y1,000bn to push the index up to 18,000."