Tokyo shares are to remain weak next week on the persistent strength of the yen amid uncertainty over deadlocked US talks for raising its debt limit before a Tuesday deadline, dealers said Friday.

Kenichi Hirano, operating officer at Tachibana Securities, said there was “an 80 percent chance” that the worst case scenario — a US debt default that would send shockwaves through world markets — would be avoided.

But stocks will move in a narrow range amid investor caution before any outcome, he said.

“The market is unlikely to fall sharply on domestic factors as Japanese corporate earnings released so far have been generally favourable,” Hirano said, pointing to the fact that many firms are still forecasting profits for the fiscal year.

“Although some companies that showed dismal results were hit with heavy selling,” he added.

In the week to July 29, the Nikkei index at the Tokyo Stock Exchange slumped 2.95 percent, or 299.08 points, to 9,833.03. The Topix index of all first section shares lost 3.16 percent, or 27.44 points, to 841.37.

The stalemate in US congressional leaders’ negotiations for raising the nation’s debt ceiling by an August 2 deadline in order to avert default has sent the dollar lower against the yen and put pressure on global stocks. Read More