One former hostage had said at least three of the 14 rebels of the Tupac Amaru Revolutionary Movement (MRTA) were alive after army commandos stormed the residence, ending a three-month siege.
The remains of the 14 guerrillas who died in the operation are to be exhumed on Monday for forensic tests.
The rebels held 72 people captive until Mr Fujimori ordered a military assault on the building.
The BBC's South America correspondent James Reynolds says prosecutors will find it very difficult to try Mr Fujimori, who now lives in Japan. He has Japanese nationality and the Japanese Government does not want to extradite him to Peru.
Sovereign territory
The alleged crime also took place on Japanese sovereign territory, further complicating the prosecutors' hopes of trying him.
Mr Fujimori says all the rebels died in an initial blast set off by the commandos when they stormed the building.
But the deputy state attorney for human rights, Ronald Gamarra, says that unofficial post mortems carried out after the siege, along with eyewitness reports, indicate that Mr Fujimori and his former intelligence chief Vladimiro Montesinos should face murder charges.
Peru's Justice Minister, Diego Sayan, said on Friday that if there was enough evidence to back the allegations, Mr Fujimori could be tried under human rights laws by a judge in Japan or Peru.
Secret burials
All but one of the hostages were freed unharmed and all the rebels died.
At the time, the raid on the Japanese ambassador's residence was seen by many as a triumph for Mr Fujimori and Mr Montesinos, who is now in hiding.
Mr Fujimori was acclaimed as the president who took a tough stance against left-wing rebels.
But rumours about a summary execution of the rebels surfaced just days after the raid, in April 1997.
It was then reported that two of the guerrillas were shot in the forehead after being captured, while at least one had been shot after begging to surrender.
The bodies of the 14 rebels were then buried in unmarked graves around Lima. Many of the relatives say they were not allowed to see the bodies and were only informed of their burial after the event.