Tokyo shares likely to extend rally next week: dealers

Tokyo shares were on track to extend their rally next week as investors watch for the appointment of a new Bank of Japan chief, widely expected to ramp up its monetary easing, analysts said.

Over the past week, the benchmark Nikkei 225 index gained 1.90 percent, or 212.11 points, to 11,385.94. The broader Topix index of all first section shares advanced 2.23 percent, or 21.17 points, to 963.48.

Tokyo shares kicked off the week with a 2.09 percent jump on Monday as the yen weakened after Japan avoided criticism at G20 talks in Moscow over the currency's recent slide.

Critics, particularly in Europe, have accused Tokyo of engineering a devaluation of the yen, sparking fears of a global currency war in which rival nations drive down their currencies to gain a trade advantage.

Japanese officials have repeatedly denied the claims.

For the rest of the week, Tokyo shares see-sawed in line with fluctuating yen trade as Japan's new Prime Minister Shinzo Abe, whose Liberal Democratic Party swept national elections in December, keeps up his bid to breathe new life into the lumbering economy, the world's third-largest.

"If Japan is really to end 'the lost two decades', then stock prices must keep rising," said Seiichi Suzuki, market analyst at Tokai Tokyo Securities.

Abe is readying to nominate the new head of the central bank next week, with the premier having openly said he wants a more like-minded governor than the incumbent, Masaaki Shirakawa, who is stepping down next month.

Abe and Shirakawa disagreed on policy issues, with the conservative prime minister advocating big spending and aggressive easing to boost the economy. Easing tends to push down the value of the yen, helping Japan's exporters.

"Whoever become leaders of the BoJ, the direction of monetary easing policy will remain unchanged as the Abe administration has pledged to take a bold monetary easing" to stoke growth, Nomura Securities said in a note to clients.

Overseas, investors will be closely watching weekend elections in Italy while US talks over the looming threat of compulsory US government spending cuts are also in focus, Nomura said.