Japanese shares will likely stay in a tight range next week as investors look to US economic data and corporate earnings reports, analysts said Friday. In the week to January 13, the benchmark Nikkei 225 index at the Tokyo Stock Exchange rose 1.31 percent or 109.67 points to 8,500.02.
The Topix index of all first section shares added 0.69 percent or 5.00 points to 734.60.
"Healthy US economic data have cheered investors in recent days, but the momentum is shrinking," said Masatoshi Sato, strategist at Mizuho Investors Securities, noting the latest mixed US data. Weekly jobless claims, an indicator of the pace of layoffs, rose to 399,000 after steadily falling for several weeks, raising the possibility that a recent improvement in the jobs sector may have been temporary.
Meanwhile retail sales in December were flat from the month before, confirming worries that the holiday shopping season was clouded by reticent shoppers and heavy discounting.
"We are focusing on how Wall Street would react to the results of more jobs and housing data and earnings reports next week," he said. Sato said global markets also remain wary over the European financial crisis, even after smooth bond auctions by Italy and Spain on Thursday lifted spirits.
"The prospect for the European economic sentiment remains unclear, and it is hard to see whether investors are taking a breather in the global risk aversion."
Okasan Online Securities chief strategist Yoshihiro Ito told Dow Jones Newswires: "Caution over Europe has slightly eased." But he also said jitters over still more European bond auctions to come likely prevented the Nikkei from staging a substantial breakout beyond the 8500 mark on Friday.
Sato pointed to the Japanese currency's high levels against the greenback and euro as another factor weighing on Tokyo share prices. "If the optimism over the US economy recedes, it would pressure the dollar against the yen," he said, which would be a burden on the Japanese economy and exporters. Sato expected the Nikkei index to trade next week in a range between 8,300 and 8,700.