The Nikkei stock average edged lower in thin trade on Friday but many investors moved to the sidelines saying the benchmark may stay stuck in recent narrow ranges as the furious debate over future of Japan's power industry hangs over the market.
Shares of banks have been hit as the market speculates how the government will structure Tokyo Electric Power's fund to compensate victims of the crisis at its Fukushima Daiichi plant, and particularly by comments about loan waivers from the government's top spokesman.
Other utilities, which will be called on to contribute to the compensation scheme, have been further battered by concerns that that power generation and distribution could be split in a rethink of the nation's energy policy. Weakness in these two sectors have pushed the Nikkei to a 0.4 percent decline this week and market players say the index may trade between 9,500-9,800 for the next few weeks.
"We're stuck today and we'll probably stay stuck in the recent range in the mid-term," said Shoji Yoshigoe, deputy general manager at Mitsubishi UFJ Morgan Stanley Securities. "The majority of serious players have been spooked by the political risk posed by the comments from the government about banks and utilities," he said. The benchmark Nikkei average closed down 0.1 percent at 9,607.08 on Friday while the broader Topix shed 0.5 percent to 827.77.
The Nikkei's immediate resistance level is seen at its 25-day moving average of 9,676, while support lies at the top of its daily Ichimoku cloud at 9,574.29, analysts said. After the bell, Tokyo Electric Power Co reported a net loss of $15 billion on Friday to account for the disaster at its Fukushima nuclear power plant, the biggest corporate loss in Japan outside of the financial sector.