Tokyo market: Retailers set to gain, exporters to lose

JAPANESE exporters, such as Canon, may fall this week amid concern that a strengthening of the yen will eat into earnings overseas. Retailers and housing-related firms may rise on expectations of economic recovery. Small-cap shares will rise as investors buy stocks whose earnings are not influenced by a rising yen. The Bank of Japan sold yen on Friday - the eighth time since 10 June - to support the dollar.

The yen may get stronger as "intervention doesn't seem to work," said Shigemi Nonaka, executive managing director at Sanyo Investment Trust Management. "Domestic institutions will try to sell holding shares before the half fiscal year [to improve their balance sheets]."

Nonaka expects the Nikkei will trade within the 17,000 to 18,200 range in the coming week. Exporters such as Canon are poised for a fall. Japan's largest maker of automated office equipment, it depends on foreign markets for 83 per cent of sales.

On Friday, the yen fell as low as 111.18 to the dollar after the Bank of Japan's intervention, yet climbed again and was trading at 109.20 in London.

Investors will also watch US economic indicators such as industrial production and August's consumer price index. If the figures suggest acceleration in economic growth, it may raise concern on inflation and a subsequent interest rate increase, sending US stocks and the dollar lower.

Retailers such as Fast Retailing may rise on hopes that Japanese consumers will spend more after Thursday's gross domestic product figure showed stronger-than-expected economic growth during the April to June period.

Small-cap shares such as Oracle may also gain in the Jasdaq over-the- counter market. Both OTC indexes extended gains and now have five weeks of increases behind them. Oracle is a unit of the world's second-largest software company.

The Jasdaq rose 7.5 per cent last week, finishing at 77.94 - the highest since records began in 1993.

The Nikkei OTC index gained 8.8 per cent to close at 2,036.48, topping 2,000 for the first time since July 1994.

"The GDP number and relatively better economic outlook is encouraging foreign investors to buy Japanese stocks," said Kazue Mayuzumi, deputy chief operating officer at Nikko Securities.

"With the yen unstable, this money will go to shares with stronger growth prospects, such as internet issues."