Tokyo investors will focus on US and Japanese data next week as they wait to see how the US budget crisis affects the Fed's timeline for pulling back on its monetary easing plan. Eyes will also fall on corporate earnings in Japan over the next few weeks as the falling yen has boosted hopes for buoyant profits among the nation's firms.
"It's possible that the Nikkei will strengthen for the immediate term if robust corporate earnings reports and upgrading of forecasts continues," Daiwa Securities said.
The market will turn its focus to the state of the US economy with fresh housing, jobs and durable goods data due over the coming week, Daiwa added, while Japan is set to publish monthly trade and inflation data.
The Nikkei 225 ended a seven-day rally on Friday, slipping 0.17 percent as the benchmark index finished the week up 1.09 percent, or 156.80 points, to 14,561.54. The Topix index of all first section issues added 0.69 percent, or 8.35 points, to 1,205.52 over the week. Japan's premier bourse got a boost as Washington politicians reached a deal to reopen the government after a two-week shutdown, averting a debt default.
Investors are now waiting for the Federal Reserve to provide a timeline for pulling back on its $85 billion-a-month bond buying plan, but it has said its next move hinges on the state of recovery in the world's biggest economy.
The temporary nature of the US debt agreement means another round of political deadlock could re-start in January, said Sumitomo Mitsui Banking Corp strategist Daisuke Uno. In currency trading Friday, the dollar was at 97.88 yen, little changed from late Thursday in New York but well below the mid-98 yen range in Tokyo on Thursday. A strengthening yen tends to weigh on shares of Japanese exporters.
Automakers ended lower Friday with Toyota shares sliding 0.95 percent to 6,280 yen and Honda down 0.25 percent at 3,940 yen.
Sony was off 0.41 percent at 1,930 yen while banking giant Mitsubishi UFJ edged up 0.16 percent to 638 yen. Shiseido lost early gains to finish 0.11 percent lower at 1,753 yen after saying L'Oreal offered to pay about $315 million for a pair of French-based cosmetics businesses owned by the Japanese make-up firm.
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