Tokyo's Nikkei ended up 2.68 percent on Monday, its biggest one-day rise in four months, as semiconductor-related stocks such as Advantest Corp mirrored a rally by their US peers while banks and brokerages extended recent gains.
Buying speeded up after Sharp Corp, the world's largest maker of liquid crystal display televisions, said during the midday break that it would brief on its outlook for the April-September first half.
After the closing bell, Sharp said it expected operating profit for the first half to rise 32 percent from a year earlier on strong demand for its flat display panels. Shares of Sharp, which had not previously issued first-half earnings forecasts, closed up 5.56 percent at 1,596 yen.
The Nikkei average rose for a third straight day, gaining another 294.46 points to 11,279.63, its biggest one-day percentage gain since June 7.
The broader TOPIX index rose 1.98 percent to 1,139.45.
Trading was active with 1.829 billion shares changing hands on the first section, the highest total since September 10.
Gainers overwhelmed decliners 1,357 to 157.
Analysts said they were seeing an improvement in the supply/demand balance in the market as a spate of selling by individual investors appeared to be ending.
Investors, who are obliged by trading regulations to return money borrowed for margin trading within six months, had been selling stocks they bought in April, when the Tokyo market hit a two-and-a-half year high.
"On top of the better supply and demand situation, the market also got a boost from gains on Wall Street, where stocks climbed despite higher oil prices," said Takahiko Murai, general manager of equities at Nozomi Securities.
But he said Monday's gains did not mean a complete change in market fundamentals, which are still being weighed down by worries about higher oil prices and corporate earnings for the year ahead.
US crude oil futures eased in Asian morning trade, but were not far from a record settlement of $50.12 a barrel in New York on Friday.
Advantest, the world's biggest maker of semiconductor testing devices, rose 6.33 percent to 7,050 yen and Tokyo Electron Ltd, the world's second-biggest maker of chip equipment after Applied Materials Inc, climbed 3.66 percent to 5,660 yen.
Electronics conglomerate Hitachi Ltd jumped 3.61 percent to 688 yen and rival Toshiba Corp shot up 5.71 percent to 426 yen.
Nintendo Co Ltd rose 1.59 percent to 13,440 yen. After the market closed, the game maker boosted its 2004/05 earnings estimates by 20 percent on strong demand for its GameCube console, software titles for its handheld GameBoy Advance and currency gains.
UFJ Holdings Inc, the smallest of Japan's top four banks, advanced 1.61 percent to 505,000 yen, rising together with its rivals after a better result than expected in the Bank of Japan's "tankan" survey of corporate sentiment on Friday prompted investors to buy banks and other stocks that were hit hard in the market's nine-day losing streak to Wednesday last week.
Nomura Holdings Inc, Japan's biggest brokerage firm, was up 3.06 percent at 1,484 yen. But many analysts said such gains could easily be pared as institutional investors are still very cautious about Japan's economic outlook and are unwilling to build up more positions.
"The 'tankan' may have just provided a buyback opportunity because investors were becoming tired of selling. In fact, we are seeing increasing signs of further worsening in market fundamentals due to things like higher oil prices and a possible slowdown in corporate earnings growth," said Akio Yoshino, chief economist at Societe Generale Asset Management.
Bucking the market's gains, oil refiner and copper smelter Nippon Mining Holdings Inc shed 0.51 percent to 588 yen after touching a lifetime intraday high of 599 yen on Friday.
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