Recovery in the Nikkei to continue

The economic recovery remains sluggish and the recent financial market turmoil seems to have dampened the mood. With the stronger yen lowering corporate profits and reducing import costs, we think the Bank of Japan will be forced to step up the pace of easing before too long, perhaps as early as next week. We therefore expect the exchange rate to weaken again in coming months and still see further upside for the Nikkei.