TOKYO -- The Nikkei Stock Average will likely tread water this week, with the benchmark index fluctuating between 14,100 and 14,700.
Tokyo stocks are starting to be undervalued due to the overall fall in the market until last week. This, combined with the strong performance of Japanese companies, is expected to draw buying at lower prices. At the same time, however, investors are reacting more nervously to economic indicators in the U.S. and China.
Last week, Tokyo stocks fell 149 points, or 1%, for the sixth week in a row. Uncertainty over the U.S. economy, which took a blow from a cold snap, is weighing on stock prices, as is concern over the default of China's wealth management and trust products. With investors turning risk-averse, speculation rapidly spread that demand for the yen as a low-risk currency will increase, resulting in the sell-off of Japanese stocks.
Market attention will be focused on corporate performance in China. HSBC of the U.K. will on Thursday announce China's preliminary Manufacturing Purchasing Managers' Index for February. In the U.S., the Federal Reserve Bank of New York and the Federal Reserve Bank of Philadelphia will each announce economic indicators on Tuesday and Thursday. If these announcements ease concern over China's slowdown or confirm the steadiness of the U.S. economy, it will encourage the buying of Japanese stocks.
The G20 Finance Ministers and Central Bank Governors meeting will be held in Sydney, Australia, on Feb. 22-23. There is lingering concern over emerging economies, but if a cooperative attitude is shown at the meeting, it will give reassurance to the market. The effects of the U.S. Federal Reserve's tapering of quantitative easing may also be discussed at the meeting.
On Tuesday, the Bank of Japan will announce the results of its monetary policy meeting, at which it will likely decide to continue its quantitative and qualitative easing measures.
On Thursday, the Ministry of Finance will announce the trade statics for January. According to a Quick Corp. macro survey, the country's trade balance is expected to log a record deficit of 2.4945 trillion yen ($24.1 billion). A surge in imports caused by last-minute demand before the consumption tax hike will have an impact. A huge trade deficit will highly likely curb the yen's upside and support Japanese stocks.
As for individual issues, Sony will begin on Saturday releasing its PlayStation 4 game console in Japan.