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Saturday February 13, 9:41 pm Eastern Time
WEEKAHEAD-Japan credit easing to buoy Tokyo stocks
By Hiroko Nakata
TOKYO, Feb 14 (Reuters) - Tokyo's benchmark Nikkei average is likely to test 14,300 this week, the top of its recent range, after the Bank of Japan eased a key interest rate target, traders and analysts said.
The central bank's move, announced late on Friday, is expected to trigger a stock rally. On Friday, the market's barometer Nikkei 225 average closed at 13,973.69, up merely 74.81 points from its close a week earlier.
''The news will support the Tokyo stock market psychologically, since it will temper worries over risks of a higher yen,'' said Keiko Kondo, strategist at Merrill Lynch Japan Inc, adding it would also ease concerns about interest rates.
The bank said it would lower its target for the key overnight call rate to 0.15 percent from 0.25 percent. The bank cited worries that recent rises in long-term interest rates and the yen, as well as weak prices, would further batter the nation's flagging economy.
Hitoshi Ichio, strategist at Commerz Securities, said the Nikkei 225 would test 14,300, the upper limit of the recent trading range."
Analysts also said that the Nikkei average would be supported by hopes that public funds due to be received by Japanese banks will help them clean up their bad loans mess.
The Nihon Keizai Shimbun has said major banks, including those applying for public funds, are expected to write off more than nine trillion yen ($79 billion) in nonperforming loans.
The paper said 17 banks, including the Bank of Tokyo-Mitsubishi which did not apply for public funds, were expected to increase their equity capital by a total of about 10 trillion yen and write off more than nine trillion yen in nonperforming loans.
The final amount of capital injection is still flexible, subject to further talks between regulators and banks over how the banks will pull themselves out of their bad loan mess, a root cause of the nation's long-running economic doldrums.
Data released by the Financial Supervisory Agency showed last month that Japan's 17 biggest banks had 44.22 trillion yen of questionable and problem loans as of the end of September, up from 44.09 trillion yen at the end of March.
The Nihon Keizai Shimbun report, if confirmed, would mean banks still would be left with more than three-quarters of their bad loans, a major drag on hopes of a swift Japanese economic recovery.
But traders also said any rally in the Nikkei average would likely be limited by sales by companies which want to unwind their cross-shareholdings before the end of this fiscal year on March 31, traders said.
Japanese companies often hold shares of other companies to cement their business relations. But in recent years, they have unwound some of these holdings to help improve their financial health.
Other factors in the market include:
* Pioneer Electronic Corp to unveil its business results for the third quarter of 1998/99 on Tuesday, February 16.
* Economic Planning Agency (EPA) to announce revised December leading economic indicators on Thursday, February 18.
* Bank of Japan to announce Japan's wholesale price index (WPI) for the first 10 days for February on Friday, February 19.
Voltaire |
