The Nikkei average rose 1.12 percent on Thursday as technology shares including Kyocera Corp and Shin-Etsu Chemical Co Ltd gained after a rally in their US peers and ahead of earnings reports.
With Japan's corporate earnings season having entered its busiest phase, reports from companies were a dominant factor for trade, with investors picking up shares in firms presenting good figures such as cosmetics maker Shiseido Co Ltd.
JFE Holdings Inc jumped more than 4 percent after the world's fourth-biggest steel maker posted higher profits than expected for last business year. The announcement prompted investor buying of other steel shares, making the steel sector the best performer among the TOPIX's 33 industry sub-indexes.
"The market had been capped by concerns that corporate earnings forecast for the current business year would not be good. But looking at actual figures that have come out so far, investors feel some relief," Yoshihisa Okamoto, a senior vice president at Fuji Investment Management.
"It seems the Tokyo market has started chasing a rally in New York," he said. The Nikkei ended up 193.01 points at 17,429.17, recouping most of the losses sustained in the previous session. The broad TOPIX index was up 0.95 percent at 1,703.41. Trade volume surpassed the key 2 billion shares level for the first time since April 19, with 2.02 billion shares changing hands on the Tokyo exchange's first section.
Advancing shares beat decliners by a ratio of nearly four to one. "Overall, earnings figures were not as bad as expected," said Yoku Ihara, manager in the investment information department at Retela Crea Securities. "Companies are cautious in forecasting their earnings due to a change in accounting rules. But it's a technical issue," he said.
Electronics components maker Kyocera ended up 2.1 percent at 11,740 yen. After the close of trading, the company reported a 53 percent rise in its group net profit in the year ended March. Shin-Etsu, a maker of silicon wafers, rose 3.6 percent to 7,720 yen. It is due to report its earnings results on Friday.
Japanese video game maker Nintendo Co Ltd said after the close that its yearly profit more than doubled on vigorous sales of its DS handheld games, and it forecast bigger growth than expected this year. But automaker Nissan Motor Co and brokerage Nomura Holdings Inc may come under pressure as they reported profit falls in 2006/07.
Investors bought shares of companies with strong earnings. Shiseido closed up 2.4 percent at 2,535 yen. Earlier in the day, it posted 75 percent growth in group net profit for the year ended March 31 and projected a 16 percent rise in its group operating profit for 2007/08.
Suppliers affiliated with Toyota Motor Corp such as Denso Corp and Aisin Seiki Co also climbed after announcing solid annual profit growth. In contrast, Calsonic Kansei Corp, part of the Nissan Motor Co group, was down 2.0 percent at 499 yen due to worries about soft earnings, dragged down by its parent's woes.
Among other notable gainers, Nippon Restaurant System Inc soared 4.1 percent to 4,100 yen after Japanese coffee shop chain Doutor Coffee Co announced a merger with the restaurant operator. The shipping sector was the second-largest percentage gainer within the TOPIX's 33 industry sub-indexes, with Kawasaki Kisen Kaisha Ltd rising more than 4 percent, as a jump in the freight market to a record brightened the profit outlook.