Market watchers are expecting Tokyo stocks to enjoy a bull run in 2007, thanks to improved corporate performances and a solid economic recovery.
The dollar meanwhile is expected to soften somewhat against the yen as the gap in interest rates between Japan and the United States narrows on expected monetary tightening by the Bank of Japan and a possible rate cut in the U.S.
Along with U.S. and Japanese monetary policy, the focus of attention for financial markets in 2007 will be whether Prime Minister Shinzo Abe's Cabinet continues the reforms started by Junichiro Koizumi.