Fast-rising Tokyo shares may take breather

Fast-rising Japanese shares may take a breather next week as worries grow that the market may be overheating, dealers said Friday. A weaker yen may keep sentiment generally upbeat, particularly if accompanied by fresh signs of a recovery in the US economy, they added.
But there are concerns that stocks may have risen too quickly and the uncertain outlook for corporate earnings may come back into focus during the upcoming results season in the United States and Japan. In the first trading week of 2010 through January 8, the Nikkei-225 index of the Tokyo Exchange gained 251.88 points, or 2.39 percent, to 10,798.32.
The broader Topix index of all first-section shares gained 33.70 points, or 3.71 percent, to 941.29 during the week to Friday. The swift rise in Japanese shares is starting to raise some worries among investors, said Toshihiko Matsuno, senior strategist at SMBC Friend Securities.
"Investors are starting to talk about the speed of the rise as being very fast. It is possible that, at some point, the market will take a breather," he said. The Nikkei has soared more than 1,700 points, or almost 19 percent, since November 27, when worries about Dubai's debt crisis were shaking markets. But stocks could remain well supported if the US jobs market shows further signs of an improvement, dealers said.
Nomura Securities analysts said in a memo to clients that the recovery outlook for the American economy was the main focus of the market. US consumer confidence numbers and Japanese machinery orders data should also provide trading cues, Nomura said.
Upcoming US corporate earnings results for the October-December quarter may also influence trading. Japan's quarterly earnings season is also due to get into full swing later this month. The appointment of Japan's new Finance Minister Naoto Kan should have limited long-term impact on the market, analysts said, although exporter shares could benefit if he reiterates his preference for a weaker yen. "Mr. Kan's appointment was not a shock. But the market will keep its eyes on what Mr. Kan might say," Matsuno said.