Japan stocks seen stable next week

In the week to January 21, the benchmark Nikkei index at the Tokyo Stock Exchange fell 2.14 per cent, or 224.52 points, to 10,274.52.

The Topix index of all first section shares sagged 2.09 per cent, or 19.46 points, to 910.85 over the week.

After firming earlier in the week, the Nikkei index retreated on Friday to close at its lowest level since December 30 amid investor concerns that China may raise interest rates next week, causing knock-on damage to global growth.

"Shares fell on profit-taking on Friday but the selling pressure appeared short-lived," said Masumi Yamamoto, equity market analyst at Daiwa Securities Capital Market.

"We believe market players will revive their buying sentiment next week on expectations of America's steady recovery and other positive factors. A weaker yen is another reason to buy exporters."

The yen was trading at 82.90 yen per dollar on Friday, compared to a 15 year high of 80.21 reached in November.

Yamamoto said the Nikkei was likely to trade between 10,200 and 10,500 in the coming week.

The market is closely watching major US economic events including the Federal Reserve's two-day policy-setting meeting starting Tuesday and the release Friday of gross domestic product for the fourth quarter, analysts said.

Nomura Securities said in a report that "investors, expecting about a 3.5-per cent gain in GDP, are watching whether the data will confirm the country is on a recovery path and how the market will react to the figures."

The coming week will continue to see an abundance of corporate results of major US companies, and Japanese firms will start releasing their earnings reports.

"US firms have so far reported upbeat quarterly results and the focus is on whether earnings forecast for 2011 will be revised upward," Nomura said.

The Bank of Japan is scheduled to hold a two-day policy meeting from Monday.