Nikkei to edge up but output, yen could cap gains

TOKYO (Reuters) - Japan's Nikkei average is seen likely to edge higher on Monday, although gains could be capped if industrial output figures disappoint or the yen rises against the dollar, market analysts said.

Daiwa Securities Group (8601.T) may be in focus after saying on Friday it would raise about $2.5 billion in its first share sale in 20 years as it looks to expand overseas and bolster its domestic retail operations. The Nikkei is likely to inch higher and to make a try for the 10,000 level in the near term, said Hiroichi Nishi, general manager in the equity division of Nikko Cordial Securities.

"That could happen if bright signs are confirmed," Nishi said, adding that in addition to Monday's industrial output the focus this week would be on economic data such as the Bank of Japan's tankan business sentiment survey due on Wednesday.

Market analysts said the Nikkei is likely to move between 9,800 and 10,000. It closed at 9,877.39 on Friday.

In a sign the Nikkei is likely to open higher, Nikkei futures traded in Chicago closed at 9,955, 0.6 percent above their Osaka close.

Masayoshi Yano, a senior market analyst at Meiwa Securities, said Tokyo shares could attract buying if industrial output beats forecasts, but a worse-than-expected result could weigh on the Nikkei.

Tokyo shares could also face selling pressure if the dollar were to fall below 95 yen, Yano said.

The dollar fell broadly on Friday after China renewed its call for a super-sovereign reserve currency and as improving appetite for risk dented the greenback's safe-haven allure.

The dollar edged up 0.2 percent from late U.S. trading on Friday to 95.35 yen. A fall in the dollar to below 94.88 yen hit on trading platform EBS earlier in June would take the dollar to its lowest level in about a month.

Industrial output is seen likely to have risen 7 percent month-on-month in May, according to the median market forecast in a Reuters survey. That would be the biggest monthly gain since 1953.

The U.S. Nasdaq rose on Friday, on strong demand for Palm Inc's (PALM.O) Pre smartphone, while the Dow was dragged lower by sliding oil prices and strength in some financial stocks helped cushion the S&P 500's decline. .N

(Editing by Michael Watson)