Tokyo stocks are expected to post modest gains this week after another run of strong economic data spurred heavy buying last week to drive up the Nikkei average four percent to a 21-month high.
Analysts say investors will tread cautiously and recent domestic-oriented winners such as property, banking and insurance shares may attract profit-taking.
"The market is rising way too fast," said Ken Masuda, senior dealer in equities at Shinko Securities.
"There have been some corrections, but they usually ended in a half day and investors soon came in to scoop up stocks like a bulldozer," he said.
Masuda said the banking and insurance sectors in particular may become the target of profit-taking.
Both sector indices rose about nine percent last week.
Traders said real estate shares were also likely to take a breather after last week's big gains.
Japan's largest property developer, Mitsui Fudosan, rose 7.9 percent to end the week at a 28-month high.
But the securities sector may play catch-up, brokers said.
Trade volume on the first section of the Tokyo Stock Exchange hit 2.1 billion shares last week, a level last seen in July 2003 and near those of the 1980s bubble era.
Analysts expect the Nikkei to trade between 11,200 and 12,000 this week after ending trade on Friday at 11,537.29, its highest closing level since June 6, 2002. The Nikkei has risen just over eight percent since the start of the year.
The performance of the Nasdaq Composite Index will also help to determine whether the market continues to rise.
The technology-laced US index dipped 0.36 percent on Friday after a surprisingly weak February employment report.
"You need large-cap shares, not only domestic-oriented shares, to come on strong," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
"Attention is focusing on when the Nikkei will clear 12,000 and I have a feeling that it might take a bit, possibly in April or after," he said. Masuda said that while shares such as Sony Corp may face profit-taking pressure, TDK Corp and Murata Manufacturing Co appear to have room for further rises.
Although investors are cautious about the market's rapid rise, underlying currents remains bullish.
Traders said the Bank of Japan's quarterly "tankan" corporate sentiment survey, one of the most closely watched gauges of the economy, is expected to provide further proof of a solid economic recovery when it is released on April 1.
Traders also note promising technical indicators.
At the end of February, for the first time in three years, the Nikkei's candle chart showed a "golden cross" - a bullish sign in which the 12-month moving average crosses the 24-month moving average.
The last time the 12-month moving average surpassed the 24-month average, the Nikkei rallied for six months, Masuda said.
"From this chart, it's well likely that the Nikkei would go as high as to 13,000," he said.