Telecoms shares and companies announcing plans to cut costs and streamline operations may climb. Mitsubishi Electric surged 22 per cent in three days after saying it would cut its workforce and capital expenditures.
The market may take its cue from the central bank's quarterly survey of business confidence, to be released on Monday before the market opens. The survey may show an improvement in sentiment by large business manufacturers for the first time in seven quarters.
"Gaijin [foreigners] believe in restructuring, locals don't," said Scott McGlashan, head of Far Eastern investments at Perpetual. "But if there are any signs of life in the survey, the locals will become increasingly worried about missing a further leg up in this rally."
The benchmark Nikkei index climbed for a seventh week in eight, adding 1.7 per cent for the week. It ended the fiscal year on Wednesday at 15,836.59, the lowest in 14 years, a fourth year of decline and a 4.2 per cent drop on the year.
The survey may show that 44 per cent of large manufacturers are more pessimistic about economic conditions - down from 49 per cent in December - but below the 43 per cent they had forecast in December.
Small manufacturers are likely to be less pessimistic since the government set up a 20,000 billion yen loan guarantee programme for small businesses in October. The government has already guaranteed some 13,000 billion yen and is considering expanding the programme even more.
"A lot of small business owners have climbed off the ledge since October and are answering their bankers' phone calls because the government has guaranteed their debt," said Robert Howe at AIMIC Investment Management.
While many overseas investors have raised their weightings in Japan from severely underweight, there is still more buying to come. And with the pressure on domestic institutions to sell cross shareholdings for book closing now eased, any new buying would have a greater effect on the index.
"When the world decides it wants to buy Japan, the value of the money that's coming into the market is much larger than before, relative to overall market capitalisation, and so it can have a dramatic effect on stock prices," said Campbell Gunn, at Meiji Dresdner Asset Management.Reuse content