The market will also be capped by worries over a continuing credit contraction. Traders will watch carefully to see how effective moves to inject public money into the crippled banking sector will be.

On Friday, the market's key barometer Nikkei 225 average closed at 13,280.54, up 400.57 points from its close a week earlier. "The Nikkei 225 will probably remain in a tight range with the lower limit at around 12,500," said Hitoshi Ichio, strategist at Commerz Securities (Japan) Co Ltd.

He said worries that banks' cautious stance will increase corporate bankruptcies were underlying in the market. On Friday, Japan's parliament enacted laws to provide 60 trillion yen ($517 billion) in public funds to shore up the country's crippled banking sector.