The outlook for Japanese shares next week hinges on another series of economic data here and in the United States as investors focus on an uncertain outlook for interest rates, dealers said.
For the week to September 8, the Tokyo Stock Exchange's benchmark Nikkei-225 index lost 53.79 points or 0.33 percent to 16,080.46 Friday. The blue chip marker had closed at a more than three-month high of 16,385.96 on Tuesday before giving back all of the gains.
The broader TOPIX index of all first-section stocks slipped 13.43 points or 0.82 percent to 1,619.92.
Next week investors will be combing over fresh data, including possible revisions to Japan's gross domestic product data for the April-June quarter and machinery orders for July, both due on Monday.
"The market forecast is for GDP to be revised up to 1.2 percent growth from 0.8 percent" on an annualised basis, said Kazuhiro Takahashi, equity general manager at Daiwa Securities SMBC.
That would still be well below the 2.7 percent pace of the quarter to March.
"Share prices might not be affected if the revised data is in line with the market forecast," said Takahashi.
But if the market takes the data as fresh evidence of solid economic growth in Japan, share prices are expected to rise, Takahashi added.
He forecast that investors will react calmly to Japan's July machinery orders, which are expected to slip after a jump the previous month.
Japanese share prices managed to recover some of their losses on Friday after the Bank of Japan left its key interest rate on hold at 0.25 percent, as expected, even though governor Toshihiko Fukui left the door open to further rises.
In the United States investors will be keeping tabs on retail sales Thursday and consumer prices Friday for leads on the inflation situation there.
Most analysts expect the US Federal Reserve to keep policy unchanged over the months ahead although very strong wages figures this week led some to believe the Fed could need to tight further. The US central bank kept its key fed funds rate on hold last month at 5.25 percent, after 17 consecutive quarter-point increases.
"Dealers will be carefully watching US indicators which will provide some clues on US monetary policy," said Ryuta Otsuka, strategist at Toyo Securities.
"The Fed is largely expected to leave its interest rate unchanged at its next meeting on September 20 but the market tends to react to each indicator sensitively and Japan's stock market will track that," Otsuka said.
Takahashi forecast the Nikkei-225 index will remain between 15,800 and 16,500 points next week if the market reacts favourably to domestic data and foreign investors buy in. Otsuka forecast the Nikkei will hover around the 16,000 points level.
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