Japanese share prices may stagger next week as investors wait to see whether the Bank of Japan will raise interest rates for the first time in almost six years, analysts said Friday.
For the week to July 7, the Tokyo Stock Exchange's benchmark Nikkei-225 index dipped 197.57 points or 1.27 percent to 15,307.61.
The broader TOPIX index of all first-section shares shed 13.81 points or 0.87 percent to 1,573.15.
The Bank of Japan (BoJ) is scheduled to hold a two-day policy board meeting through Friday with many analysts predicting the central bank will bring an end to the era of near-zero interest rates as deflation fades.
"Japanese stock markets will be cautious next week about both the US and Japanese interest rate outlook," said Masayoshi Yano, a market watcher at Tokai Tokyo Securities.
Dealers would also be taking their cue from monthly US jobs data which was due out Friday after the close of Tokyo trade.
They were hoping for a fresh lead on the outlook for further interest rate rises by the US Federal Reserve following 17 straight quarter-point increases to the current level of 5.25 percent, he said.
"Investors will be hesitant to chase share prices higher until the BoJ meeting is over and (the Nikkei) will stay within a range of 15,000 and 15,500 points next week," Yano added.
Yano said the market would need active buying from foreign investors to make decent headway, noting recent subdued daily turnover. Japanese share prices were dragged down this week by news of North Korea's missile launches and worries about possible further tests, but analysts remain hopeful the negative effect will be short lived.
"I think the effect of the North Korean missile issue is temporary considering US stocks firmed Thursday. "Tensions will rise if they fire missiles again but it's unlikely to result in war. They are using missiles as a tactical threat," he said.
On the data calendar, Japan will release its May machinery orders Monday while US indicators will also influence Tokyo sentiment.
"US stock markets may be driven by US indicators until the next Fed meeting in August," said Hiroaki Hiwada, strategist at Toyo Securities. "That said, share prices won't be overly sold as investors will also be watching US corporate earnings results," he said.
Hiwada forecast the Nikkei-225 will hold around 15,500 points next week.