* Stronger U.S. economy, emerging markets likely to support
* Potential for a reversal in market liquidity a worry
* Europe debt problems expected to fade away
By Antoni Slodkowski
TOKYO, Dec 8 (Reuters) - Japanese stocks are likely to end next year roughly 17 percent above current levels, helped by a recovery in the U.S. economy and robust performances from emerging markets, a Reuters poll showed.
Expectations of a stable dollar/yen rate slightly higher than levels projected by Japanese exporters will also support sentiment, with some analysts saying they expect many companies to raise their earnings forecasts in the first quarter of next year.
The benchmark Nikkei average is likely to end 2011 at the pre-Lehman level of 12,000, according to a median forecast of 24 market participants polled by Reuters in the last week. Projections ranged from 9,200 to 14,000.
Such a climb would build upon a 12 percent gain since the beginning of November, when overseas investors returned to lagging Tokyo equities after U.S. monetary easing lifted expectations of more liquidity in financial markets.
"A recovery in corporate earnings led by external demand-related firms will likely continue into the next year," said Fumiyuki Takahashi, equity strategist for Barclays Capital Japan.
"Many firms have assumed a dollar/yen rate of 80-83 yen for their earnings estimates but it has been steady at around 83 yen, so this will also be a positive factor for the companies and their shares," he added.
Despite recent gains, the Nikkei has lost about 3 percent so far this year. By contrast, Hong Kong's Hang Seng Index had gained some 5.6 percent and Wall Street's Dow Jones industrial average is up nearly 9 percent.
Market players now predict the Nikkei will advance to 11,000 by next June, up from the 10,350 estimated in September's poll.
The Reuters poll was in line with a Goldman Sachs prediction published last week that the Nikkei will likely gain about 20 percent in the coming year.
The likelihood of a stronger U.S. economy, inflation concerns in emerging Asia, a weaker yen, as well as a continued earnings expansion and supportive valuations, were behind its view, the brokerage said.
Analysts said a recent slew of positive U.S. economic data had boosted expectations of a sustainable recovery and given the market the ability to look past setbacks such as Friday's surprisingly weak jobs figures, which showed the U.S. unemployment rate increased to 9.8 percent.
LIQUIDITY CONCERNS
But they also expressed concerns that recent gains were more due to an abundance in market liquidity that has prompted investors to seek out riskier assets, rather than real improvements in the economy.
Some said the Nikkei could trade in a tight range until next autumn as investors grow wary of the fading effects of U.S. monetary easing while others worried about event risks that could put that liquidity at risk.
"Economic fundamentals aren't that great and are being supported by easier monetary policy in Japan, the U.S. and Europe," said Takuya Yamada, a senior portfolio manager at ITC Investment Partners.
"If we continue to have excess liquidity, then stocks will be basically on a firm footing but there could be a trigger that prompts a reversal in this liquidity."
Others noted that they remained concerned about geopolitical risks in the region, which has seen a rising China and North Korea's deadly shelling of a South Korean island, although many said worries about sovereign debt in the euro zone are likely to ease.
"From an economic standpoint, monetary tightening that is too aggressive from China, would be overkill," said Masaru Hamasaki, a senior strategist at Toyota Asset Management. (Additional polling by Bangalore Polling Unit; Editing by Edwina Gibbs and Jon Loades-Carter)