With Tokyo shares on the longest losing streak in half a century, investors want reassurance from the Group of Eight powers next week that they are determined to shore up the world economy, analysts say. The benchmark Nikkei index has fallen for 12 straight trading days for the first time since April 1954.
The headline Nikkei-225 index lost 306.47 points or 2.26 percent over the week to July 4, ending at 13,237.89 on Friday. The Topix index of all first section shares on the Tokyo Stock Exchange fell 22.8 points or 1.73 percent to 1,297.88.
Shares were pressured by worries about surging crude oil prices and slowing US economic growth, dealers said.
With little major economic data due next week, markets will monitor the G8 summit in Japan gathering leaders from major industrialised nations. Investors want to see if G8 members have any ways to try to contain inflation after crude oil prices surged to fresh record highs this week, analysts said.
"Markets are expecting a consensus among G8 leaders that they are vigilant about stagflation around the world. That would reassure markets," said Fumiaki Nakanishi, market research head at SMBC Friend Securities. The president of the OPEC producer cartel, Algerian Energy Minister Chakib Khelil, said oil prices could hit 170 dollars a barrel in the coming months, sparking jitters about the outlook for consumption and company earnings.
"In that context, if the G8 says nothing about oil prices, then it would be a green light for prices to try to rise further," said Nakanishi, calling on the G8 leaders to issue a strong message. "They're not on a leisure trip," he said.
Markets were also waiting to see if US officials would gain the co-operation of other countries for measures to stem the weakness of the dollar, which analysts say has contributed to pushing oil prices higher.
"The biggest factor that would put a brake on oil prices is if the G8 shows a strong attitude to tackle global inflation by defending the dollar," said Hirokazu Fujiki, chief strategist at Okasan Securities. "The remarks could be taken positively by markets but ... overall shares will continue to be weak," he said.
G8 finance chiefs in a meeting last month generally expressed support for a strong greenback but did not mention the dollar in their joint statement. Delegates said there was no discussion about co-ordinated market intervention.