Tokyo market: Corporate slump threatens share gains

JAPAN'S benchmark stock index may pause in its rally in the coming week on concern that a retreat by US stocks and glum Japanese corporate earnings may stymie gains, investors said. That caution comes after the Nikkei topped 17,000 last week for the first time in 14 months.

Honda Motor, Fuji Photo Film, TDK and Shiseido are just some of 250 firms reporting results next week for the year ended March.

"Worries about 2000 earnings, continued poor macroeconomic data and the potential for the US market to continue to be weak aren't that supportive for the Japanese market," said Robert Howe, chief investment officer at AIMIC Investment Management, handling $2.5bn (pounds 1.5bn) in assets.

The benchmark Nikkei 225 stock average rose 1.5 per cent to 16,946.52 in a two-day trading week - Monday, Tuesday, Wednesday were national holidays - its fourth week of gains in six, leaving the benchmark up 22 per cent for the year.

Winston Barnes, senior equity manager at WestLB Securities Pacific, said: "It's a sell at 17,200, and a buy at 16,600. "The economic numbers have been horrendous, but people still want to play in the market." Overseas investors were net buyers of Japanese stocks in the week ended 23 April for the 14th week in a row, according to the Tokyo Stock Exchange. "The only factor to cause real volatility would be the US - particularly an interest-rate hike," said Joji Maki, who supervises Y50bn (pounds 260m) in equities at Nikko Asset Management.

US Federal Reserve Chairman Alan Greenspan said on Thursday that potential labour shortages and a runaway US stock market may stoke inflation. The policy-making Federal Open Market Committee next meets on 18 May.

Sakura Bank was the best performing stock in the Nikkei in the past two weeks, climbing 29 per cent to Y510, on expectation of a turnaround.

Japanese bonds are likely to rise next week amid confidence the government will not sell more debt to fund economic programs soon. "Bonds haven't hit the ceiling yet," said Takeshi Naito, a senior market economist at Daiwa SB Capital Markets.

Last week, the benchmark Number 212, 10-year bond rose 0.809, or Y405 per 50,000-yen bond, to 101.648. The yield fell 9 basis points to 1.315 per cent.

"I can't be bearish," said Masahiro Kami, the chief fund manager at Daiwa SB Investments. "It's dangerous to sell bonds now, thinking the ceiling will be there."