Japanese shares will remain at the mercy of investor fears over eurozone debt next week, analysts said, having closed on Friday at a nearly two-month low with a stronger yen denting exporters.
Tokyo's Nikkei index has fallen in line with plummeting investor confidence in the eurozone, with Spain facing high borrowing costs ahead of general elections.
"The outlook for next week is not very positive," said Kenichi Hirano, operating officer at Tachibana Securities.
"US economic indicators released recently have been mixed but generally faring well. The market could have reacted positively to such data but the European situation is aggravating" the markets, Hirano said.
"The market could have had the opportunity to stabilise after new governments (in Italy and Greece) boosted hopes of stronger measures to tackle the crisis," he said.
"But soaring borrowing costs have been dragging down global markets."
The crisis in Europe has pushed investors to dump the euro, sending the safe-haven Japanese yen higher with Italy, Spain and France seeing their borrowing costs rise sharply.
A high yen hurts Japan's export-led economy and has weighed heavily on Japanese shares.
In the week to November 18, the benchmark Nikkei 225 index at the Tokyo Stock Exchange fell 1.64 per cent, or 139.56 points, to 8,374.91.
The Topix index of all first-section issues lost 1.25 per cent, or 9.15 points, to 719.98.
Hopes lie, however, with improving segments of the US economy amid signs that American consumer confidence has began to recover, said Tsuyoshi Nomaguchi, senior strategist with Daiwa Securities.
"Continued improvement of household spending and corporate activities in the United States should have started (boosting) employment," Nomaguchi said in a note to clients.
"We expect the Japanese and US markets will see both worries about the European debt crisis and optimism about the US economy," he said.
Players may refrain from making major trading moves in the coming week, however, with a Japanese public holiday on Wednesday, while US markets will close Thursday for Thanksgiving, dealers said.