* Nikkei climbs 3.5 pct on day, up 3.4 pct for week * Domestic data, weak yen also lift market * Interest sensitive sectors lead gains * Nikkei 14,000 in sight next week - fund manager By Tomo Uetake TOKYO, June 28 Japan's Nikkei share average rose 3.5 percent to its highest close this month, helped by optimism that China on that the U.S. Federal Reserve will not soon rein in its stimulus measures and by encouraging Japanese economic data. Modest gains in Asian markets also lifted the mood as the benchmark Nikkei ended 463.77 points higher at 13,677.32, the highest close since May 31. The index gained 3.4 percent for the week, extending its winning streak to two weeks, after a confidence-sapping sell-off that began last month. Concerns over China's credit crunch continued to subside with Beijing's central bank pledging to ensure reasonable lending growth and stable markets. "Investors were relived that one of the biggest worries is receding," said Hiroichi Nishi, an assistant general manager at SMBC Nikko Securities. The improved mood in Asian bourses followed Wall Street's rally as two more U.S. Federal Reserve officials sought to reassure markets that any tightening of its stimulus drive was still a distant prospect. Upbeat domestic data also contributed to Friday's advance. Japan's core consumer prices were flat in May compared with a year earlier, marking the first time they have stopped falling in seven months, government data showed on Friday. Meanwhile, Japanese industrial output rose 2.0 percent in May from the previous month, up for the fourth consecutive month, a sign that a pick-up in exports is underpinning factory output and the broader economy. The figure was better than a market consensus of a 0.2 percent increase. "Investors were cheered by the better data and see that Abenomics is being effective for the economy," said Takuya Takahashi, an analyst at Daiwa Securities. The Topix gained 3.2 percent to 1,133.66, with 3.19 billion shares changing hands. That was the highest in a week but still below last month's average daily volume of 4.67 billion. The weak yen also buoyed the market, with the yen dropped a two-and-a-half week trough to the dollar in Asian trade on Friday, helping exporters attract buyers. Against the greenback, the yen weakened 0.4 percent to 98.75 after falling to 99.03 yen earlier, its lowest since June 11. Mazda Motor Corp rose 4.6 percent, while Subaru maker Fuji Heavy Industries Ltd added 5 percent. Panasonic Corp jumped 6.7 percent after the company sold about 60 percent of its holdings in other firms and raised 140 billion yen ($1.4 billion) to repay debt. MORE UPSIDE IN SIGHT? Market players said the Nikkei may remain resilient. Yasuo Sakuma, portfolio manager at Bayview Asset Management, said that if other variables are constant, the Nikkei could hit 14,000 next week. He added that a 5 percent jump on Friday in the TSE real estate investment trust (REIT) index is noteworthy as it is seen as a bellwether for the market. While all of Topix's 33 subsectors were in positive territory, real estate companies and financials led Friday's charge. The Topix real estate sector sub-index climbed 5.6 percent and banking and securities sub-indices advanced 4.8 percent and 4.6 percent, respectively.