Nikkei up 1.1 pct as weak yen offsets data

* Relief after U.S. markets receive Chrysler news calmly

* Yen hits 2-week low vs dollar, buoys exporters

* Japan back in deflation, jobless rate at four-year high

* Canon higher, Fujitsu jumps after earnings

By Shinichi Saoshiro

TOKYO, May 1 (Reuters) - Japan's Nikkei average gained 1.1 percent on Friday, with exporters like Sony Corp (6758.T) climbing as a further retreat in the yen helped offset gloomy domestic indicators released before the market opened.

Canon Inc (7751.T), the world's largest digital camera maker, climbed 4 percent after its raising its annual outlook, while Fujitsu (6702.T), Japan's biggest computer server vendor, jumped 19 percent after beating analysts estimates with its annual outlook.

Market watchers said players were calm about Chrysler filing for bankruptcy. [ID:nLU940906]

"The U.S. markets reacted calmly to Chrysler filing for chapter 11. In addition, with the weaker yen lifting exporters, the market was offered some respite," said Tsuyoshi Segawa, an equity strategist at Shinko Securities.

Investors also took gloomy domestic economic data in their stride.

Japanese core annual prices fell 0.1 percent in March, the first fall in around a year and a half, sending the country into its second round of deflation in less than two years, while the jobless rate rose to a four-year high of 4.8 percent. [ID:nT316908]

"The market had priced in a weakening of these indicators. It is now continuing to focus and draw support from yesterday's better-than-expected industrial production numbers," said Segawa at Shinko Securities.

Japanese industrial production numbers released on Thursday showed output in March rose 1.6 percent, twice as fast as forecast, and the first gain in six months. [ID:nT277157] The benchmark Nikkei .N225 climbed 96.22 points to 8924.48, after ending up 3.9 percent on Thursday.

The broader Topix gained 0.9 percent to 845.10.

Sony rose 1.8 percent to 2,575 yen and Canon gained 4.4 percent to 3,080 yen.

Fujitsu (6702.T), also Japan's No. 2 PC maker, jumped 18.8 percent to 499 yen, after it forecast a profit of 80 billion yen for the year to March 2010, far better than a consensus estimate of a 23.8 billion yen profit by 14 analysts. [ID:nT362037]

Softbank (9984.T) rose 5.9 percent to 1,642 yen after Japan's third-biggest mobile phone operator said it would halve its net interest-bearing debt by March 2012 and reduce it to zero by March 2015. [ID:nT16523]

The dollar advanced 0.4 percent to 98.98 yen JPY= after climbing above 99 yen to hit a near two-week high. [FRX/] (Reporting by Shinichi Saoshiro; Editing by Joseph Radford)