* Factory data offsets positive mood after S&P's record rise * Profit-taking on reflationary stocks cap gains * Sentiment remains bright for new fiscal year - analyst * Panasonic falls on disappointment over no job cuts By Tomo Uetake TOKYO, March 29 (Reuters) - Japan's Nikkei share average rose on Friday, helped by improved risk appetite after the S&P 500 hit a record high and concerns about the Cyprus bailout receded, but poor factory data capped gains. Market players said many investors stayed on the sidelines on the last business day of the fiscal year in Japan and as many regional and global markets were closed for Good Friday. The Nikkei ended 0.5 percent higher at 12,397.91 points in volatile trade, after several forays into negative territory. The benchmark gained 0.5 percent on the week, leaving it 0.4 percent below its 5-day moving average of 12,449.15. Worries about the European debt crisis receded as banks in Cyprus reopened to relative calm on Thursday following the country's controversial bailout that taxed large depositors. That allowed the S&P 500 to drift up to a record closing high in spite of a rise in U.S. jobless claims. However, Japanese data on Friday was weak, with industrial production unexpectedly falling 0.1 percent in February from the previous month, compared with a median market forecast for a 2.6 percent rise. "The data is hurting sentiment, although the impact should be limited and it may not last long," said Yutaka Miura, a senior technical analyst at Mizuho Securities. The Topix dropped 0.2 percent to 1,034.71 in thin trade. "What's happening today is a tug-of-war between window-dressing activity and profit-taking," said Ryota Sakagami, chief equity strategist at SMBC Nikko Securities. "I don't think many domestic active fund managers are in the market today." He said "overly high" expectations for the Bank of Japan's policy meeting next week had been shrinking and that encouraged investors to lock in profits for now in the reflationary stocks that have gained a lot over the last quarter and led this year's rally. The Nikkei has gained about 20 percent so far this year on Prime Minister Shinzo Abe's push for bolder monetary and expansionary policies to beat deflation and bolster growth, which have contributed to a sharp weakening in the yen. Analysts said institutional investors were sellers on Friday, taking profits REITs and real estate stocks, which have led the recent gains. In the real estate sector, Mitsubishi Estate Co dropped 2.1 percent and Mitsui Fudosan Co fell 1.2 percent. The sector sub-index shed 1.4 percent to become the third worst performer on the main board. "REITs are popular investment funds which are expected to rise further, so they will likely invest in them again after the new fiscal year starts," said Hajime Nakajima, deputy general manager at Cosmo Securities. The REIT index, which rose to a five-year high on Thursday, fell 0.1 percent. Nippon Prologis REIT Inc shed 3 percent, Comforia Residential REIT Inc tumbled 4.7 percent and Nippon Accommodations Fund Inc dropped 3.7 percent. The banking sector, which has also benefitted from the reflationary trade, fell 0.9 percent. Other notable movers included Panasonic Corp, which sunk 7.1 percent after the consumer electronics maker disappointed some investors by not announcing job cuts in its medium-term business blueprint. STRONG BASE SEEN The underlying trend for Japanese equities was still strong, SMBC Nikko's Sakagami said, with sentiment likely to brighten next week with the start of the new fiscal year and the central bank's first policy meeting under its new aggressive leadership on April 3-4. BOJ Governor Haruhiko Kuroda said on Thursday that the central bank would consider buying longer-dated Japanese government bonds and other risk assets, and would continue monetary easing until its 2 percent inflation target is achieved.