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Tokyo shares are likely to rebound next week on the back of a weakening yen and expectations of easing by the Bank of Japan, dealers said Friday, despite this week seeing the end of a 12-week rally.
The benchmark Nikkei 225 index lost 0.34 percent, or 38.18 points, to end the week at 11,153.16, while the broader Topix index of all first-section shares gained 1.59 percent, or 14.7 points, at 957.35.
The Nikkei soared to a four-and-a-half-year high on Wednesday, following a sharp rally on Wall Street that saw the blue-chip Dow Jones Industrial Average close in on a new all-time high.
Tokyo's rise also followed Bank of Japan (BoJ) Governor Masaaki Shirakawa's announcement late Tuesday that he would step down about three weeks before his five-year term ends next month, sending the yen into freefall.
However, concerns about political instability in Spain and Italy put the eurozone's long-running debt crisis back on the radar, while profit-taking ahead of a long weekend in Japan also dragged the market lower.
"Considering the approaching three-day holiday and the size of this week's earlier advance, today's aggressive profit-taking is not unusual," Fumiyuki Nakanishi, head of investment and research at SMBC Friend Securities, told Dow Jones Newswires. Tokyo is closed Monday for a public holiday.
"The index looks likely to find strong support in the low 11,000 area, but in the end this depends on currencies, as a weaker yen trumps all other factors," he added.
Next week, investors will be watching US President Barack Obama's State of the Union address with "various announcements including issues linked to the fiscal problem, immigration policy reforms and boosting gun control are expected," Nomura Securities said.
Investors would be closely watching the BoJ's two-day policy board meeting starting on Wednesday and Japanese gross domestic product data for the quarter to December later in the week.
Markets were also set to look ahead to a G20 meeting of finance ministers and central bankers next week, Nomura said.