The Nikkei stock average surged to a two-week high, breaking above a major resistance level on Thursday, after the world's central banks took co-ordinated action to ease funding strains among banks caused by the debt crisis in Europe. The central banks' move to offer cheaper dollar funding eased worries about an immediate meltdown in the global financial system, but market players remained cautious about prospects for resolution of the crisis.
"This just means they expanded emergency measures. The more important point is whether Europe is going to have a bigger bailout fund, and that's still up in the air," said Soichiro Monji, chief strategist at Daiwa SB Investments. Volume spiked to its highest since October 28, with 2 billion shares changing hands on the main board, up 29 percent from its 20-day average.
The benchmark Nikkei rose 1.9 percent to 8,597.38, climbing above its 25-day moving average of around 8,577 and rising at one point to 8,653, its highest level since November 14. The broader Topix index climbed 1.6 percent to 740.01. But selling by European pension funds continued, underscoring the potential for distress in the eurozone to push the market lower.
"A lot of blue chips are being bought, simply because they dropped to rock bottom last month," said Masayoshi Okamoto, head of dealing at Jujiya Securities. The Nikkei faces more resistance from its 75-day moving average around 8,687 and above that the daily Ichimoku cloud looms at 8,704-8,746.
But Yutaka Miura, senior technical analyst at Mizuho Securities said he did not expect the benchmark to get near the Ichimoku cloud ahead of a meeting of European leaders on December 9, a summit seen as a make-or-break moment for the region. With the expiry of Nikkei December futures options due next Thursday, the option strike price of 8,750 may also become a resistance point, market participants said.
Construction makers and shippers, the main beneficiaries of China's booming economy, were among the top performers after China's central bank cut reserve requirements for commercial lenders on Wednesday for the first time in three years. The Nikkei China 50 sub-index outperformed the broader market and gained 2.8 percent. Construction machinery maker Komatsu Ltd jumped 7.2 percent to 2,032 yen while rival Hitachi Construction rose 7.3 percent to 1,423 yen. Mitsui OSK Lines rose 8.4 percent to 259 yen.
Japan's mobile carriers Softbank Corp and KDDI Corp fell on a report that NTT Docomo Inc was also planning to sell Apple's iPhones and iPads in Japan. Softbank, which had until recently been the sole provider of the iPhone in Japan, dropped 5.1 percent to 2,419 yen and was the heaviest-traded share by turnover on the main board.
Shares in Docomo, which denied the report, rose 2.3 percent to 138,100 yen while KDDI fell 1.7 percent to 496,500 yen. Shares of drugmaker Daiichi Sankyo Co Ltd rose 2 percent to 1,400 yen after US authorities gave its subsidiary Ranbaxy Laboratories Ltd the green light to make the first generic version of Lipitor, a blockbuster cholestrol-lowering drug.
Japanese financials bounced back from recent losses, with the banking sub-index gaining 1.6 percent, buoyed by gains in their US counterparts. Sumitomo Mitsui Financial Group climbed 3 percent, and Mitsubishi UFJ Financial Group rose 3.1 percent. Nomura Holdings Inc was up 2.8 percent at 255 yen, after earlier climbing to its highest level in almost a month. The investment bank's shares fell to its lowest in almost 37 years last week, as thin trading volumes and withering share prices threatened brokerages' profit outlooks. Advancing shares outnumbered declining issues 3 to 1.