Tokyo stocks closed 0.10 percent higher Friday, with the market's strong start fizzling as the dollar lost ground against the yen. The benchmark Nikkei 225 index, which surged 1.23 percent by the break, ended 16.12 points higher at 15,381.72. The Topix index of all first-section shares was up 0.18 percent, or 2.26 points, to 1,248.57.
Profit-taking and fears of overheating saw a sharp investor sell-off as the market crept toward a high of 15,627.26 in May, its highest level in over five years.
It dived the next day. "Investors fear they might see a repeat of the plunge on May 23," said Hiroyuki Fukunaga, CEO at Investrust.
"However, today's sell-off appears to be merely due to position adjustments and profit-taking by short-term traders ahead of the weekend."
On Wall Street, the Dow closed above the key threshold of 16,000 for the first time, extending a rally that has seen the index add more than 22 percent this year. It rose 0.69 percent, to 16,009.99.
Thursday's Wall Street rally followed buoyant economic data, including a drop in weekly US jobless claims and data from the Markit analysis group that showed rising US manufacturing activity in November.
Analysts also cited the Senate Banking Committee's endorsement of Janet Yellen to take over the helm at the US Federal Reserve. "The overall sentiment is increasingly 'risk-on' with Janet Yellen likely to be appointed, no Fed bond-buying tapering likely for the time being, and high expectations for the start for US Christmas sales looking solid," Tatsunori Kawai, chief strategist at Kabu.com Securities, told Dow Jones Newswires.
The upbeat outlook provided strong support to the dollar Friday morning, despite the likelihood the Fed's stimulus will remain in place for the time being, a negative for the dollar. But the greenback eased later Friday, fetching 100.99 yen, down from 101.16 yen in New York Thursday afternoon.
Shares in electronics maker Sharp jumped 8.41 percent to 322 yen on reports it is boosting production of smartphone screens for the huge Chinese market.
Mobile carrier SoftBank was up 2.25 percent at 8,150 yen after news that US hedge fund Third Point has taken a one percent stake in the firm.
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