The Japanese market rebounded from a two-decade low in 2003 with investors encouraged by corporate restructuring and cost-cutting as well as Tokyo's clear commitment to rescue troubled banks brokers said.

The recovery of the benchmark Nikkei 225 index, which hit a 16 month-high in October, was backed by foreign investor buying and a smaller-than-expected impact from Severe Acute Respiratory Syndrome (Sars) and the Iraq war, they said.

"The key driver for this year has been active cost-cutting and corporate restructuring, which resulted in a major improvement of the underlying profit-generating capacity at manufacturers," said Tsuyoshi Segawa, equity strategist at Shinko Securities.