Clearly the focus is on a possible raise in rates by the Bank of Japan, which would strengthen the Yen against the USD and China Yuan, thereby diminishing the revenue prospects of the auto and chip sector manufacturers.

This situation will be the important one for traders of Japanese stocks probably for the next two quarters. A raise up in rates is not going to slow the economy much in Japan but, everything being relative to the USD/Yuan, is going to impact how the equity market behaves.

I believe 2006 will be a year of transition for the Asia Pacific equity markets, where international money flows will move away from Japan and Korea, which have been very hot, and into China¸Taiwan and Hong Kong manufacturing, and the Mainland China oil Sector.

The technology sectors of the various Chinese markets are going to be dependent on continued global economic expansion, which is looking a little dubious as today it appears the yield on the 30-year U.S. Treasury bond is going to dip below 4.50, further inverting the yield curve.