The Nikkei average rose 2.82 percent on Friday and booked its first weekly gain in six weeks, as a sharp rebound on Wall Street and easing concerns about a rise in US interest rates spurred buying in Canon Inc and other recently battered stocks.
Toyota Motor Corp and other auto makers gained ground after falling since early May on concerns about an economic slowdown in the United States, their key market. Analysts said the market was getting a bounce after the Nikkei fell nearly 20 percent from its April peak. "The market has fallen to a level where technical rebounds are due," said Kenji Kobata, managing director in research department Ace Securities Co Ltd.
The Nikkei share average rose 408.58 points to 14,879.34. On the week, the benchmark was up 0.9 percent, its first weekly gain since the first week of May. Friday was also the average's biggest one-day percentage gain since February 21.
The capital-weighted TOPIX index advanced 3.28 percent to 1,534.71. The TOPIX posted its biggest one-day percentage gain in nearly 4 years.
Tomomi Yamashita, a senior fund manager at Shinkin Asset Management Co Ltd, said traders may now shift their focus to corporate earnings from US inflation fears.
Electronics conglomerate Toshiba Corp gained 6.5 percent to 724 yen, and digital camera maker Nikon Corp rose 5 percent to 1,995 yen after Merrill Lynch upgraded both stocks to "buy" from "neutral", citing their profit growth.
Likewise, Elpida Memory Inc jumped 8.3 percent to 4,850 yen after Mitsubishi UFJ Securities in a report on Friday upgraded the stock to "1" from "2". Mitsubishi Corp extended its gains after Japan's biggest trading company told Reuters that it aims for a group net profit of 450 billion yen in the year to March 2009, up 22 percent from this year's target. The stock ended up 6.4 percent to 2,250 yen.
In the auto sector, Toyota Motor rose 3.7 percent to 5,840 yen, after hitting its lowest point of the year on Wednesday. Honda Motor Co Ltd added 3.6 percent to 7,150 yen. Other blue chip shares also rose, with Sony Corp up 4.7 percent to 4,940 yen. Sharp gains in the market lifted brokerage shares, with Nomura Holdings Inc jumping 6.6 percent to 2,185 yen.
Toray Industries Inc surged 6.4 percent to 953 yen after the company said it had developed a way to mass-produce carbon fibre composite. Hiroaki Kuramochi, managing director at Bear Stearns (Japan) Ltd, said there would be some political uncertainty in Japan ahead of September when Prime Minister Junichiro Koizumi is expected to step down.
Some investors are also concerned about Japan's financial system after high-profile fund manager Yoshiaki Murakami was arrested on suspicion of insider trading and Bank of Japan Governor Toshihiko Fukui came under fire for his involvement in the fund. Analysts said a possible rise in Japanese interest rates is also a concern as a Reuters survey showed on Friday that Japanese financial markets still expect the BOJ to end its zero-rate policy as early as July despite the recent slide in stocks.
Trade was active, with 2.12 billion shares changing hands on the Tokyo market's first section, exceeding last year's daily average of 2.07 billion shares. Advancers beat decliners by a ratio of nearly 13 to 1.
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