What to watch: Monday, 4/7: Cabinet Office’s Diffusion Index of Economic Indicators; Tuesday, 4/8: Cabinet Office’s “Economy Watchers” Survey; Tues-Weds. Bank of Japan Monetary Policy Meeting; Thursday, 4/10: Cabinet Office’s Machinery Orders for February; Friday, 4/11: Bank of Japan — Producer Price Index (PPI); Fri-Sat. G7 meeting of Finance Ministers

Ongoing: External factors to continue to weigh heavy on market sentiment; Exchange rate volatility (strong yen “bad”, weak yen “good” black-and-white impact on stocks) ahead of G7 meeting; Bank of Japan (BoJ) disarray may be nearing an end as the Opposition Party (DPJ) has signaled its willingness to accept interim deputy governor Masaaki Shirakawa for the spot as Bank governor. Resolving this absurdity ahead of the BoJ’s MPM decision Wednesday and at least before the G7 meeting Friday is a top priority.

Markets: Last week the question was whether the direction would be to 13,000 or back towards 12,000. In fact, 13,000 was recouped even with the dip on Friday. This week it will be a matter of whether the 13,000 level can be held by week-end. Bad news is seemingly already baked into economic data and the BoJ is expected to hold at 0.5%, so really all eyes will be watching overseas developments and waiting for G7 Ministers’ commentary. Looking to the remainder of the month, earnings on both sides of the Pacific will be in focus. Since earnings expectations are low, the critical point will be current fiscal year projections.

Weekly recap: Nikkei 225: +3.7% to 13,293.22 — the first three-week rally since last October. Weekly low of 12,430 on Monday, 3/31; weekly high of 13,389 on Thursday, 4/3. Nikkei 225 futures in Chicago lower on Friday to 13,320, but held up nicely considering the U.S. employment data release. Nikkei 225 futures in Osaka closed at 13,280.

As of Friday’s close the N225 is trading at 14.9x trailing earnings, 14.75x forward earnings, 1.5x book, 1.4% trailing yield and 1.6% forward yield. By comparison, the broader TOPIX (1st Section) is trading at 16.9x trailing earnings, 15.6x forward earnings, 1.4x book, 1.7% trailing yield and 1.8% forward yield.