Japanese shares may rebound this week

TOKYO: Japanese shares may enjoy a rebound from last week's losses as the yen stabilises and investor fears potentially ease this week over debt woes in Europe and the United States, analysts said last Friday.

Shares felt the impact of the eurozone crisis and downgrade threats looming over US debt last week prompting the rise of the safe-haven yen versus the euro and dollar.

The strong yen deflated sentiment that had recently been lifted by signs of a faster than expected post-quake recovery, dealers said.

But Tsuyoshi Nomaguchi, Daiwa Securities strategist, noted that the Nikkei index may head back towards the 11,000 level “if external factors such as the debt problems in Europe and a high yen calm down.”

Last Friday, Italy was near the finishing line in racing to slash benefits and pensions with a 48-billion-euro (US$68bil) austerity budget to firefight the eurozone debt crisis lapping at its shores.

In the week to July 15, the benchmark Nikkei Index at the Tokyo Stock Exchange slipped 1.61% or 163.26 points to 9,974.47, reversing a 2.73% gain earned the previous week.

But the broader Topix Index of all first section shares lost 1.71% or 14.98 points to 859.36.

The renewed worries over the Greek debt crisis and its possible spread to larger economies, such as Italy and Spain, pulled down European and US markets last week, weighing on Japanese shares.

Meanwhile ratings agencies threatened to downgrade US debt as the White House and Republican opponents remained at odds over a long-term plan to slash the huge US deficit.

The country faces a risk of default if it fails to raise its US$14.3tril debt ceiling by August 2.

Investors sold the euro and the dollar in favour of the yen, whose appreciation hurts Japanese exporters by making their products more expensive overseas and by reducing the value of their foreign revenues.

But the Nikkei and Topix held steady for the rest of the week, despite the steady surge of the Japanese currency to 79.20 yen to the dollar last Friday from 81.28 a week earlier.

The indexes ended the trading week in positive territory, with Nikkei enjoying a 0.39% rise last Friday while the Topix added 0.29%. AFP