* BOJ stimulus hopes also help sentiment - traders
* Nikkei falls 1.1 pct for the week, 3rd weekly losses
* Nikkei's volatility index hits above 40
By Ayai Tomisawa
TOKYO, Jan 22 (Reuters) - Japan's Nikkei share average scored its biggest single-day gain in 4-1/2 months on Friday, helped by a weaker yen, a bounce in oil prices and a hint of more stimulus from ECB president Mario Draghi.
Also helping sentiment was speculation that the Bank Of Japan may announce fresh stimulus measures at its policy meeting next week.
The Nikkei share average ended 5.9 percent higher at 16,958.53, recouping most of its losses from the past two days.
Still, for the week the benchmark index shed 1.1 percent, falling for a third week.
Traders said that foreign investors such as hedge funds and oil funds, which had been heavily reducing risky assets recently, bought back battered shares.
But they said it would be too hasty to assume that the market has hit a bottom, and that volatility may persist for a while. The Nikkei volatility index stayed above 40.
"It's good to see such rises today, but we shouldn't be overjoyed," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "The market should not forget what happened last September."
On Sept. 9, the Nikkei soared 7.7 percent on stimulus hopes, but later that month slumped to a 8-month low on worries about the slowing Chinese economy.
"The market is so volatile that it can turn around in the opposite direction easily," Fujito said, adding that investors are cautious ahead of major economic events next week.
The U.S. Federal Reserve will have a policy meeting on Jan. 26-27, while the BOJ's policy meeting is on Jan. 28-29.
Economists polled by Reuters expect more stimulus from the BOJ in coming months, and a few traders believe it could move as early as next week.
The BOJ is likely to cut its core consumer inflation forecast for the coming fiscal year to possibly below 1 percent at a policy review next week, say three sources familiar with its thinking.
Separately, the Nikkei reported that Japan's central bank is "taking a serious look" at expanding its monetary easing measures as sliding oil prices make it harder to reach its 2 percent inflation target.
Oil prices rose for a second session on Friday, moving further away from 12-year lows plumbed earlier this week, lifting oil shares.
Inpex Corp soared 7.2 percent and Japan Petroleum Exploration Co surged 5.5 percent.
Exporters were in demand, with Toyota Motor Corp jumping 6.7 percent and Honda Motor Co surging 6.0 percent.
The broader Topix gained 5.6 percent to 1,374.19 and the JPX-Nikkei Index 400 rose 5.6 percent to 12,391.02. (Editing by Kim Coghill)