Steel companies such as NKK, and other companies closely linked to the performance of the domestic economy, may fall amid concern that a new government spending package will be insufficient to stimulate growth.
"Investment trusts have taken over from foreigners as the main buyers in the market," said Jonathan Allum, strategist at ING Baring Securities. "Some people aren't as convinced as they were before about the economy and think growth may slow down in the next fiscal year."
The benchmark Nikkei 225 stock index fell 96, or 0.5 per cent, to 18,258.55 during the week. It reached 18,659.55 on Thurs-day, the highest since September 1997.
Telecom shares, which have risen 42 per cent in the past 18 days, may extend their gains as investors expect newly started funds to keep buying these shares. Investors say they also expect to see demand for Nippon Telegraph & Telephone after Japan completes the sale of a fifth block of shares in the world's largest phone company.
NTT has risen 43.4 per cent in the last three months as investors delayed buying the shares in anticipation of the additional supply.
Newly introduced funds, including eight started with capital of Y150bn on 30 October, are likely to give a boost to telecom shares and software companies.
A Japanese government economic package announced on Thursday was bigger than investors expected, though it failed to boost shares in construction and machinery companies due to concern that they have too much capacity and too many staff.
Bonds are likely to be little changed, as a strengthening yen may underpin prices now that investors are confident bond sales for the next few months won't expand beyond expectations. If the US Federal Reserve raises rates at its meetingthis week, it could help Japanese bonds by boosting the yen as declining US bonds weaken the attractions of the dollar.