* Nikkei hits highest since June 5
* Easing worries about China banking system helping mood
* Strong industrial production data, CPI lift market
* All sectors in positive territory
By Ayai Tomisawa
TOKYO, June 28 Japan's Nikkei share average rose
3.3 percent to a three-week high on Friday morning, helped by
optimism that the Federal Reserve will not rush to rein in its
stimulus measures and by encouraging domestic economic data.
Gains in Asian markets also lifted the mood, sending the
Nikkei up 435.26 points to 13,648.81 at the midday
break, its highest since June 5.
The Nikkei has dropped 0.9 percent this month so far, while
it is up 10 percent for the second quarter.
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 are cheered by the better data and see that
Abenomics is being effective for the economy," said Takuya
Takahashi, an analyst at Daiwa Securities.
Analysts said that gains in Asian markets including Shanghai
shares are also underpinning sentiment as concerns about a
potential banking crisis in China continued to ease.
China's one-week cash rate fell to its lowest since last
week's sharp credit squeeze and stocks rose as much as 2 percent
on Friday morning, with banks having little trouble securing
funds to meet their end-of-quarter requirements.
"Investors were relived that one of the biggest worries is
receding," said Hiroichi Nishi, an assistant general manager at
SMBC Nikko Securities.
The Topix gained 3.2 percent to 1,133.66.
The weak yen is also helping the mood, and exporters
attracted buyers with the dollar up at 98.81 yen, from around
98.40 yen in early Asian trade. Toyota Motor Corp
gained 2.2 percent, Sony Corp added 2.5 percent, and
Nikon Corp advanced 2.7 percent.
Panasonic Corp rose as much as 6.2 percent after
the company sold about 60 percent of its holdings in other firms
to repay debt.
The benchmark Nikkei has dropped 14 percent since reaching a
5-1/2-year high on May 23, hurt by slowing growth in China,
fears of a pullback in U.S. stimulus and disappointment over the
Japanese government's recently announced growth strategy.
However, it is still up about more than 30 percent this year
on the back of Prime Minister Shinzo Abe's expansionary policy,
weaker yen as well as the Bank Of Japan's sweeping monetary
Market players said that the Nikkei may remain resilient as
overseas headwinds such as worries about the U.S. Fed's plan to
trim its stimulus and fears for the stability of the Chinese
banking system are easing. But they added that volume may stay
subdued in the absence of firm catalysts.
Volume on the Topix at the midday break was around 1.6
billion shares, on track to undershoot last month's average
daily volume of 4.67 billion shares.
"Buying may be contained in short-covering," said Mitsushige
Akino, chief fund manager at Ichiyoshi Asset Management. "The
market wants to see April-June results, and investors want to
see the results of the upper house election to trade
On Thursday, U.S. stocks rose after three Fed policymakers
sought to downplay the notion that the central bank would bring
an imminent end to its bond-buying programme.
All of Topix's 33 subsectors were in positive territory.