TOKYO Japan's Nikkei average climbed 1.8 percent on Friday to its highest level in three weeks, gaining a foothold above 9,000 after bold plans for stimulus from the U.S. Federal Reserve boosted risk appetite and lifted battered cyclical stocks.
Miners and metal producers, which have a relatively strong correlation with the health of the global economy, rallied the most. The mining sector .IMING.T jumped 5.8 percent and non-ferrous metals .INFRO.T rose 5 percent.
The Nikkei .N225 advanced 164.24 points to 9,159.39 in heavy volume, helping to hoist the benchmark well clear of its 200-day moving average at 9,002.87.
A senior dealer at a foreign bank said buy orders were outnumbering sell orders by a ratio of "between 2 and 2.5 to 1".
"A decent amount of flow, I would say ... not much hedge fund money but long-only primarily," he said, but added that currency moves, including the potential for intervention, remain a key concern.
"Japan is going to continue to underperform so long as the currency strengthens. The open question is whether the Bank of Japan is going to step in and actually do something to the currency," the trader said.
The first round of quantitative easing from the Fed helped the Nikkei surge 23 percent in the subsequent three months, and it climbed nearly 12 percent for the same period after the second dose of stimulus.
But the yen is much higher now, hitting a seven-month high of 77.13 yen against the dollar on Thursday. That compares with a level of around 95 yen to the dollar in the three months after the first QE and around 80-84 yen for the same period after the second round.
Shares in exporters however shrugged off gains in the currency on Friday, taking heart from improved appetite for risk assets. Toyota Motor Corp (7203.T) climbed 1.4 percent and Canon Inc (7751.T) added 3.6 percent.
The Nikkei closed 3.2 percent up on the week, its biggest weekly gain in four weeks. For the year, it is up 8.3 percent, underperforming a 16.1 percent gain in the U.S. S&P 500 .INX and an 11.4 percent rise in the pan-European STOXX Europe 600 .
Some market participants were doubtful that the Fed's action this time would be as effective as past efforts.
"I think it's wishful thinking to expect QE3 to fundamentally improve the global economy, much less the Japanese stock market," said Yuuki Sakurai, CEO of Fukoku Capital.
"The Fed has now spent up all its ammunition and it's still got the fiscal cliff to deal with. And even if the BOJ intervenes, the amount they can throw at the market is too insignificant to make a difference to the exchange rate."
Japan's government cut its assessment of the economy for a second straight month on Friday and a Reuters poll showed economists expect the economy to stall this quarter, keeping the BOJ under pressure to provide further monetary stimulus.
HITACHI, NOMURA GAIN
Hitachi Ltd (6501.T) added 4.6 percent after Japan's biggest industrial electronics company said it would increase its first-half dividend to 5 yen per share from 3 yen a year earlier.
Other significant gainers included Japan's top investment bank Nomura Holdings (8604.T), up 4.2 percent after it said it had restructured the management team at its U.S. equities group, which comes a week after it announced a plan to scale back its traditional stock trading businesses worldwide.
The broader Topix .TOPX index rose 1.7 percent to 756.88 in the heaviest trade since March 13, with 2.49 billion shares exchanging hands.
Volume was also boosted by the settlement of a large number of Nikkei futures and options contracts expiring in September, with the settlement price of 9,076.79.
Seven & i Holdings Co Ltd (3382.T) lost 2.4 percent after the Nikkei business daily said its first-half operating profit would likely fall 2 percent to 147 billion yen ($1.9 billion), marking its first decline for the period in three years.
(Additional reporting by Dominic Lau; Editing by Edwina Gibbs)