Japan's Nikkei gains 0.6 percent as resource stocks gain

TOKYO (Reuters) - Japan's Nikkei average rose 0.6 percent on Friday, with resource-related stocks climbing after gold hit an all-time high and Fast Retailing (9983.T) gaining after forecasting a record profit for this business year.

Nintendo Co (7974.OS) jumped nearly 7 percent after Citigroup Global Markets Japan raised its rating to "buy" from "hold," saying the company is likely to launch a new version of its popular DS handheld game player in 2010.

But trade was cautious due to persistent worries about the impact of a strong yen on corporate earnings and as investors were hesitant to actively take positions ahead of a long weekend in Japan, market players said.

"Investors are covering short positions, largely encouraged by a solid performance in overseas markets," said Masaru Hamasaki, a senior strategist at Toyota Asset Management.

"But the market seems to lack strength to produce more gains because of increasing skepticism about a Japanese earnings recovery scenario for the second half of this business year due to the strong yen."

In moderate trade, the benchmark Nikkei .N225 added 59.19 points to 9,891.66, pulling further away from an 11-week intraday low of 9,628.67 hit on Tuesday.

The broader Topix inched up 0.3 percent to 890.39.

The yen was trading around 89.00 yen to the dollar. Many Japanese exporters have set their exchange rate assumptions for the dollar at around 90-95 yen for the business year to March.

Investors fret about a stronger yen as it curbs exporters' profits when they are repatriated.

U.S. stocks edged up on Thursday as a surprising quarterly profit from Alcoa Inc (AA.N) got third-quarter earnings off to a strong start, though market players in Tokyo said the Alcoa news had been factored in during the previous day's trade in Japan.

The market reacted little to Japanese machinery orders, which rose less than expected in August as insecurity about the economy dampened any recovery in capital spending.

RESOURCE STOCKS CLIMB

Gold inched down on Friday but remained near $1,050 after rising to an all-time high for a third straight day in the previous session, lifted by the dollar's weakness.

Metal stocks climbed, with Sumitomo Metal Mining (5713.T) gaining 2.2 percent to 1,563 yen. Mitsubishi Materials Corp (5711.T) advanced 1.5 percent to 264 yen. Dowa Holdings (5714.T) jumped 4 percent to 576 yen.

"Oil money and other investors appear to be buying resource-related sectors in the past few days, encouraged by climbs in international commodity markets," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.

Nintendo climbed 6.7 percent to 23,800 yen.

Fast Retailing climbed 1.2 percent to 13,100 yen to become the top positive contributor to the Nikkei 225.

The retailer forecast a 10.5 percent rise in yearly operating profit as its Uniqlo casual clothing chain draws cost-conscious consumers away from rivals and it aggressively opens new stores in China.

It forecast a record operating profit of 120 billion yen ($1.4billion) for the year to August 2010, in line with market expectations.

Among other notable stocks, Promise Co (8574.T) surged 12.8 percent to 687 yen after the consumer lender said it plans to appoint Vice President Ken Kubo as president.

The appointment of Kubo, a former executive at Promise's top shareholder Sumitomo Mitsui Banking Corp, the banking arm of SMFG (8316.T), is expected to strengthen Promise's ties to the bank.

Yahoo Japan (4689.T) shot up 8.1 percent to 30,000 yen after Morgan Stanley upgraded its rating for the Internet company to "overweight" from "equal" and raised its target price to 42,000 yen.

Some 1.1 billion shares changed hands on the Tokyo exchange's first section, above last week's morning average of 928 million.

Declining stocks outnumbered advancing ones, 783 to 719.

(Editing by Edwina Gibbs)

($1=88.36 Yen)