Reflecting a shift in market sentiment, the yen has recouped much of its recent losses, while stocks and bonds have also reversed their recent downtrend and tended higher in recent weeks.

There are signs that a key U.S. hedge fund has been busy unwinding its Japanese positions, with rumors of an internal confrontation over fund management forcing the fund to divest itself of some operations.

In fact, the fund may have been forced to unwind its short bond and long stock and yen positions to raise the wherewithal to meet orders for the cancellation of contracts under its management.

Reflecting the sudden move to unwind its Japanese positions, the financial market has witnessed a sudden rise in sell and buy orders of late.

Thanks to a trading surge, Tokyo stocks rose strongly last week, taking the Nikkei average well above 13,800 at one time, up nearly 2,000 points from its recent low.

With the weakness of economic fundamentals and structural reform problems yet to be addressed, however, it is too early to conclude the economy is about to recover.

Judging from the recent upturn in Tokyo stocks and improved sentiment, the Japanese financial markets have apparently seen the worst.

The question now is where the U.S. economy is heading and how soon signs of a U.S. economic recovery will become discernible.