Japanese shares are likely to remain under pressure in the coming week after ratings agency Standard & Poor's downgraded the country's public debt, triggering profit-taking, dealers said Friday. In the week to January 28, the benchmark Nikkei index at the Tokyo Stock Exchange rose 0.84 percent, or 85.82 points, to 10,360.34.
The Topix index of all first section shares added 0.97 percent, or 8.84 points, to reach 919.69 over the week. Investors were prompted to take profit Friday after S&P cut Japan's sovereign debt rating to "AA minus" from "AA", accusing the government of lacking a "coherent strategy" in efforts to ease a mountain of debt.
It was the first downgrade of a G7 member since Italy in October 2006, and underlined mounting problems with national debts since the 2008 financial crisis. Four eurozone members including Spain suffered downgrades last year.
Dealers said investors were likely to stay on the sidelines next week due to lack of incentives for buying, while the trend of a higher yen against the dollar will continue to weigh on exporters' shares.
"The news that S&P cut Japan's sovereign debt rating briefly sent the Japanese unit lower against the dollar, but the yen soon rebounded," said Daisuke Uno, chief market strategist of Sumitomo Mitsui Banking Corp. "I'd say the dollar-selling trend will continue to surge the yen higher next week," he said. The Japanese currency tumbled following the downgrade announcement, with the dollar gaining by more than a yen to 83.20 yen from around 82.12 in earlier trade. The yen bounced back and was at around 82.65 to the dollar on Friday afternoon.
"The Japanese share prices will continue not taking an initiative, simply following Wall Street which will likely be under pressure without much incentives next week," Uno said.