Tokyo shares rose to more than a two-month high on Friday after the market digested the Bank of Japan's decision to stand pat on policy, while a media report that the government is considering a budget of over 3 trillion yen buoyed sentiment. The Japanese government is considering compiling a supplementary budget of over 3 trillion yen ($25 billion) to build nursing-care facilities and aid farmers, who face tougher competition as the country prepares to join a trans-Pacific trade pact, the Nikkei newspaper reported on Friday.
"This report helped sentiment. It came out when investors digested the BoJ result," said Kenji Shiomura, an analyst at Daiwa Securities.
The Nikkei ended 0.8 percent higher at 19,083.10, the highest close since August 28.
For the week, the Nikkei rose 1.4 percent, while it jumped 9.7 percent for the month, the best monthly gain in two years. Trading was choppy on Friday, with the benchmark slipping in the morning and extending its losses in the early afternoon when short-term investors were seen reacting to the BoJ's decision announced during the market lunchtime.
The BoJ held off on expanding its massive stimulus programme, preferring to save its dwindling policy options in the hope that the economy can overcome the drag from China's slowdown without additional monetary support.
Thursday's solid industrial output data had helped dampen expectations among stock market investors that there would be further easing on Friday.
"Extremely short-term investors who still believed that there may be easing seemed to have reacted to the decision," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "But others did not follow their action so they seemed to have covered their short positions immediately."
Analysts said that the BoJ may also want to wait for what the Federal Reserve decides on US rates in December. On Wednesday, the Fed made a direct reference to its next policy meeting that put a December rate hike firmly in play.
For now, analysts said, Japanese investors will likely trade on earnings-related news from companies.
The Topix gained 0.7 percent to 1,558.20 and the JPX-Nikkei Index 400 added 0.8 percent to 14,000.71.