The Nikkei average rose 0.72 percent on Friday to close at its highest level in a week as air conditioner maker Daikin Industries Ltd rose on expectations of a hot summer this year, while a softer yen helped exporters such as Honda Motor Co Ltd.
Isuzu Motors Ltd rose 2.5 percent to 645 yen after a media report that Toyota Motor Corp would outsource production of diesel engines to Isuzu, while Yahoo Japan Corp gained 3.8 percent to 43,350 yen on its tie-up with Apple Inc for music download services.
"The cheap yen is the most positive factor for the stock market. It's a boost for the Japanese economy. The Nikkei average is like the index for exporters," said Masayoshi Okamoto, head of dealing at Jujiya Securities.
The Nikkei gained 129.20 points to 17,971.49, a tad short of 18,000 but the highest close since June 7. On the week, the Nikkei lost 1 percent. The broader TOPIX index rose 0.93 percent to 1,772.94. Worries about imminent rate hikes have weighed on the stock market recently, and SBI Securities' investment information manager Hideyuki Suzuki said Bank of Japan Governor Toshihiko Fukui's remarks after the close suggested there wouldn't be any rate hike in July.
Fukui said the central bank needed to keep an eye on recent rises in long-term rates and how they could affect Japan's economic and price outlook. He also said he wants to be more convinced of the sustainability of domestic capital spending and consumption.
"These comments will be a bit positive for the stock market but mostly neutral," he said. After Fukui's comments, benchmark Japanese government bond futures extended their gains. Hiroichi Nishi, a general manager of equity marketing at Nikko Cordial Securities Inc, also said the comments were pretty much in line with what Fukui had said before and added that the market could rise next week.
"Looking at technical charts, both Japanese and US stock markets do not look overheated any more. It's very likely that Japanese and US stocks will rise," he said.
Trade volume was moderate with 1.97 billion shares changing hands. Advancers beat decliners by a ratio of more than four to one. Daikin jumped 4.4 percent to 4,320 yen as Japan's Meteorological Agency said this month that it had detected cooler than normal sea-surface temperatures in the equatorial Pacific, called "La Nina", indicating less rain and a hot summer this year. Other related stocks were also higher with Fujitsu General Ltd, an air conditioner producer, up 6 percent and Asahi Breweries Ltd gaining 0.8 percent.
Retail companies listed on the Tokyo Stock Exchange's first section posted an average 3.4 percent rise in net profit in the year ended in March but expect 17.8 percent growth this year, according to Shinko Research Institute. The dollar held near a 4-1/2-year high, pushing up Honda Motor up 1.9 percent at 4,350 yen.
A notable stock was Bull-Dog Sauce Co Ltd which leapt 6.5 percent higher to 1,694 yen after US fund Steel Partners raised its offer price for the Worcester sauce maker by 7 percent to 1,700 yen per share from 1,584 yen. Shares of Daio Paper Corp advanced 2.1 percent to 928 yen after Daio said it would buy the Japan adult diaper business of Procter & Gamble Co, making it the industry's second-biggest player after Uni-Charm Corp.