* Nikkei adds 0.2 pct, further into "overbought" territory
* Topix up 0.3 pct in active trade
* Sharp extends gains on short-covering
By Dominic Lau
TOKYO, Dec 7 Japan's Nikkei share average rose
to a seven-month high for the second day in a row on Friday,
ahead of U.S. jobs data, as persistent speculation of further
monetary easing by the central bank under a likely new
government supported the market.
The Nikkei gained 0.2 percent to 9,564.33, heading
further into "overbought" territory, with its 14-day relative
strength index at 71.2. A level of 70 or above is deemed
overbought, which often signals a possible pullback in the near
Kyoya Okazawa, head of global equities and commodity
derivatives at BNP Paribas in Tokyo, said many foreign investors
remained sceptical of the political promises to pull the world's
third-largest economy out of reflation but were forced to go in
to the market after recent surge.
"They are sceptical about Japan changing, BOJ changing," he
said. "Having said that, hedge fund clients are taking some
positions in derivatives to protect upside risk of the Nikkei."
As the Nikkei kept moving up from 9,000, sceptics started
buying exporters, Okazawa said, adding that doubts remain but
people have been "gradually forced to believe a
Japan-is-changing kind of scenario."
Led by exporters, the Nikkei has rallied 10.4 percent over
the past 3-1/2 weeks as the yen has weakened after Shinzo Abe,
the leader of the opposition party which is expected to win a
Dec. 16 general election, called for the Bank of Japan to embark
on "unlimited easing" and set an inflation target of 2 percent.
Half of Japan's manufacturers say their top request for the
winner of the election is a push to weaken the yen, which they
see as critical to reviving the country's economy, a Reuters
The benchmark Nikkei is up 13.1 percent this year, slightly
ahead of a 12.4 percent rise in the U.S. S&P 500 but
behind a 14 percent gain in the pan-European STOXX Europe 600
U.S. PAYROLLS DATA
Investors are waiting on November nonfarm payrolls data due
at 1330 GMT to see how much superstorm Sandy disrupted U.S.
Economists in a Reuters survey forecast 93,000 jobs were
created in the United States last month compared with 171,000
in October, while the unemployment rate is seen at 7.9 percent.
"There is some data in the U.S. tonight, which means people
don't want to put too much in new positions today," a senior
dealer at a foreign brokerage said.
"My flows are to the sell side ... It certainly seems to me
that the market is still in an uptrend overall on the back of
hopes of further yen weakening."
Japan's broader Topix added 0.3 percent to 790.95 in
active trade, with volume at 63 percent of its full daily
average for the past 90 trading days.
Automakers continued to head higher, with Nissan Motor Co
, Toyota Motor Corp and Honda Motor Corp
, up between 0.4 and 1.1 percent.
Sharp Corp surged 10.6 percent to a three-month
high, extending the previous session's 9.9 percent jump on short
covering after a Taiwan newspaper quoted Hon Hai Precision
Industry's chairman as saying that U.S. Qualcomm Inc's
tie-up will not affect Hon Hai's talks with the
struggling TV maker to become its biggest shareholder.
Sharp said on Tuesday after the market close that chipmaker
Qualcomm will invest as much as $120 million in Sharp, which
will boost the firm's efforts to remain viable.
Short-selling interest in Sharp has fallen lately, although
it still remains high with 91.41 percent of its stock that is
available to be borrowed out on loan as of Dec. 5, down from
93.46 percent on Nov. 30, according to data provider Markit.
But some exporters succumbed to profit-taking as investors
locked in recent gains. Nikon Corp, Hitachi
Construction Machinery Co Ltd and auto parts maker
Denso Corp slipped between 0.4 and 0.7 percent.