The outlook for Japanese share prices hinges on a key business survey due out next week, with views divided on whether stocks can resume their rise to fresh seven-year highs, dealers said Friday.
Investors are also expected to shift their focus to political debates ahead of the July 29 upper house election amid growing speculation that Prime Minister Shinzo Abe's coalition will suffer a voter backlash.
For the week to June 29, the Tokyo Stock Exchange's Nikkei-225 index of leading shares fell 50.27 points or 0.28 percent to 18,138.36, after a 1.21 percent gain the previous week. The broader Topix index of all first-section shares declined 3.11 points or 0.17 percent to 1,774.88 after rising 0.28 percent.
Shares eased back from a seven-year high struck the previous week as a sluggish performance on Wall Street encouraged profit-taking but the Nikkei index managed to recover the key 18,000 points level on Friday.
"All eyes are on the Tankan now," said Toshihiko Matsuno, a broker at SMBC Friend Securities. The results of the Bank of Japan's Tankan corporate survey for the second quarter, to be released on Monday, are expected to show business confidence holding steady and firms upgrading their capital spending plans.
"Some investors are still hungry for buying leads," Matsuno said. "The chances are high that the market will consolidate around the 18,000 points level next week."
Other market watchers remained more cautious. "Friday's gain was purely due to window dressing activity," said Norihiro Fujito, senior analyst at Mitsubishi UFJ Securities.
"Recent economic indicators were not strong enough to declare the nation's deflation is completely over," Fujito said. "I'm afraid selling pressure will resume next week."
Japan's core consumer prices showed a fourth straight year-on-year decline in May, the government said Friday, adding to jitters over a 0.4 percent drop in industrial output for May reported on Thursday.
"The market will also start becoming concerned about politics ahead of the upper house election," Fujito said. "Investors are likely to regard the political confusion as a selling factor."
In the latest opinion poll, 49 percent of voters wanted Abe's coalition to lose its majority in the July 29 election, surpassing the 35 percent who hoped the ruling bloc would keep it, the Nikkei economic daily said.
Abe's poll ratings have nose-dived since a government agency admitted it misplaced millions of payments to the pension system, a sensitive issue in the rapidly ageing country.
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