Japan's Nikkei share average rose 0.40 percent to a new 11-week closing high on Friday as a stronger reading than expected in a key corporate sentiment survey fuelled optimism about earnings and lured buyers to stocks such as Toyota Motor Corp. Underscoring improving confidence among Japanese firms, the Bank of Japan's tankan survey also showed capital spending plans for the business year that started in April have been sharply upgraded.
This helped buying in machinery stocks, such as precision machinery maker Hoya Corp Retailer Takashimaya Co and many other stocks sensitive to domestic demand also advanced.
The Nikkei rose for a fourth session to finish 46.12 points higher at 11,630.13, its highest close since April 13. The broader TOPIX index was up 0.39 percent at 1,181.80.
The Nikkei had opened lower following a fall in US stocks after the Federal Reserve raised key interest rates a quarter point for a ninth straight time and did not hint its year-long rate-increase cycle was nearing an end.
But optimism grew as investors read through the tankan's details and a rise in the dollar also helped, analysts said. The dollar hit a nine-month high above 111 yen on Friday on the Fed's rate decision, which would further widen the US currency's rate advantage over its rivals.
The tankan's headline figure, the diffusion index for big manufacturers, rose to plus 18 from plus 14 in its previous survey in March.
Economists had forecast plus 15. But it also showed the index for September at plus 17, suggesting the Japanese economy has yet to convincingly emerge from a soft patch.
For large non-manufacturers, the June index stood at plus 15, the best level since it was plus 20 in February 1992 and outperforming a consensus forecast for plus 12.
"The survey as a whole suggests the economy is having a difficult time to take off from a plateau. But it also suggests companies are increasing confidence about their business," said Hideo Ueki, chief investment officer at UBS Global Asset Management Japan.
"Behind that, I think, lies the foreign exchange rate. When they drew business plans at the start of this year, the dollar was below 102 yen. The dollar has since appreciated, expanding their profit buffer," he said.
The tankan showed big manufacturers were assuming an average dollar/yen rate of 103.95 yen for the 2005/06-business year. That suggests their yen-based revenues at the current exchange rate could be much better than originally projected.
Toyota, the world's second-biggest auto maker, was up 1 percent at 4,010 yen and rival Nissan Motor Co was up 0.6 percent at 1,104 yen.
Hoya rose as high as 13,160 yen, a record high, before ending the day up 2.3 percent at 13,090.
The tankan results came after several retailers had announced strong quarterly earnings results on Thursday. Takashimaya, Japan's biggest department store operator, jumped 5.8 percent to 1,051 yen, the best performer among Nikkei 225 components.
It posted a hefty 42 percent gain in group net profit for the three months to May, which prompted UBS to raise its investment rating on the stock to "buy 2" from "neutral 2".
Rival Mitsukoshi Ltd, which also reported strong quarterly earnings on Thursday, rose 4.8 percent to 524 yen.
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