The key Nikkei average appears likely to reclaim the 12,000 level in the coming months, given Asia's V-shaped economic recovery and signs that the global silicon cycle is about to enter a new phase.

Attention is shifting to cyclical issues, including those related to exports, semiconductors and materials.

Financial authorities and market participants hold differing views on the current financial situation.

Authorities say Japan has weathered its financial crisis, while market participants believe the financial unrest, typified by huge bad loans at banks, is merely taking a breather thanks to a pickup in stock prices before book-closings on March 31.

Although Japan is facing calls from other members of the Group of Seven major industrial powers to step up its structural reform, the intensifying situation in the Middle East may turn attention away from Japan.

In addition, Prime Minister Junichiro Koizumi's leadership may be further weakened in the wake of political scandals, such as the resignation of an influential leader in the ruling party.

As there also are other risk factors, including the outlook for the U.S. economic recovery and oil price trends, the Tokyo stock market is highly likely to repeat its small ups and downs after firming up again after the round of excessive sales.