Japanese share prices are likely to remain well supported this week, but activity may wind down somewhat as dealers prepare for a slew of data and upcoming elections, dealers said.
The Nikkei index hit a four-year high Wednesday when it closed at 12,502.26 points, as market sentiment towards the Japanese economy remained positive.
But analysts expect trade to slow down after sharp gains and as the market's focus shifts to US economic indicators, including a survey of US industry from the Institute for Supply Management (ISM).
"The key for the market this week is the US ISM index on Thursday," said Hiroyuki Nakai, chief strategist at Tokai Tokyo Research Center.
"Since the US durable goods figure was weaker than expected, investors would like confirmation of the improvement of the manufacturing industry."
Among other data expected, a US employment report for August is slated for release on Friday.
Investors are also expected to remain cautious about the impact of rising oil prices, analysts said.
"The impact of oil prices on consumption is another concern for the market considering the impact on Wal-Mart," said Nakai. The US retail behemoth reported the weakest profit growth for four years earlier this month.
Japan meanwhile will release data on its unemployment rate on Tuesday and an industrial production index for July on Wednesday.
"These economic indicators will show some signals whether Japan truly escaped from economic lull or not," said Masatoshi Sato, senior strategist at Mizuho Investors Securities.
Both analysts said that the market would keep a close watch on the run-up to Japan's general election scheduled on September 11 for clues on whether reform-minded Prime Minister Junichiro Koizumi would remain in office.
The official election campaign starts on Tuesday.
Nakai expects the Nikkei index to stay between 12,300 and 12,500 this week, while Sato forecast a wider range of 12,000 to 12,600.
For the week ending August 26, the Tokyo Stock Exchange's benchmark Nikkei-225 index rose 147.75 points or 1.20 percent to finish at 12,439.48.
The broader TOPIX index of all first section shares climbed 21.96 points or 1.76 percent during the week to close at 1,272.46.
Among major shares, Honda Motor gained 200 yen or 3.52 percent to 5,880, Toyota Motor rose 180 yen or 4.13 percent to 4,540 and Nissan Motor added three yen or 0.26 percent to 1,162.
Among technology shares, Canon climbed 110 yen or 1.99 percent to 5,640 and Sony gained 50 yen or 1.36 percent to 3,730.
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