Japan's Nikkei stock average closed above 10,000 on Friday for the first time in five weeks and rose 10.4 percent on the week, its biggest weekly gain in over a year, with exporters such as Canon Inc rising.
But Takefuji Corp fell 9.4 percent on news it had slashed lending to save cash after credit rating downgrades made it difficult for the Japanese consumer lender to raise funds.
The benchmark Nikkei edged up 0.4 percent on the day but gained nearly 1,000 points on the week in active trade, snapping a five-week losing streak thanks to a wave of short-covering supported by foreign investors.
But sustaining gains above 10,000 could be difficult, with analysts saying investors were waiting to see what sort of economic policy the government might adopt as it discusses the size of a fresh stimulus package.
"The Nikkei's recovery to the 10,000 level was due largely to the steps announced by the Bank of Japan earlier this week," said Masayoshi Okamoto, head of dealing at Jujiya Securities.
"The market has gone about as far as it can on this announcement alone, now we need to see what impact it has on the economy — and it needs to be accompanied by some steps from the government as well."
The Bank of Japan said on Tuesday it would offer around 10 trillion yen ($113.3 billion) in three-month funds at 0.1 percent and keep its key interest rate steady at 0.1 percent.
The central bank had surprised investors by calling an emergency policy meeting in the face of government pressure to do more to beat deflation.
In active trade, The Nikkei gained 44.92 points to 10,022.59, its highest level since Oct. 30. Its weekly gain was the biggest in just over a year.
The broader Topix inched up 0.2 percent to 889.58.
"A short-cover rally, which was supported by foreign investors who were relieved to see Japan's economic measures, may have come to an end," said Kenichi Hirano, operating officer at Tachibana Securities.
"For further gains, investors need to see more clarity about Japan's economic policies, along with U.S. jobs data that could still surprise the market."
JOB JITTERS
But gains were limited as jitters grew about Friday's U.S. non-farm payrolls after the services sector index fell to 48.7, indicating that this huge component of the U.S. economy had experienced contraction last month, according to a report from the Institute for Supply Management.
The ISM data prompted investor worries that Friday's non-farm payrolls report may show that the recovery is sluggish. Experts polled by Thomson Reuters forecast a drop of 130,000 nonfarm jobs in November and an unemployment rate holding steady at 10.2 percent.
In a sign of how directionless the overall market was, some exporters lost ground but others gained.
Toyota Motor Corp shed 0.8 percent to 3,730 yen and chip-tester maker Advantest corp fell 0.5 percent to 2,100 yen. But Honda Motor Co, negative during early trade, gained 1.5 percent to 3,030 yen while Sony Corp rose 1.4 percent to 2,510 yen, helped in part on signs of robust early holiday demand for its products.
Japan Tobacco Inc rose 2.7 percent to 289,900 yen after Credit Suisse raised its rating to "outperform" from "neutral" saying the risk of a sharp tobacco tax increase had receded and incremental hikes could be positive for the company.
Japan Airlines Corp surged 8.7 percent to 100 yen, its highest level in two weeks, after American Airlines said it and other members of the Oneworld airline alliance along with private equity fund TPG are willing to invest $1.1 billion in JAL to prevent it defecting to Delta Air Lines and the rival Skyteam group.
But metal shares weighed on the market after sharp gains earlier in the week when gold climbed to successive record highs and other metals gained as well.
Ferronickel producer Pacific Metals lost 1.8 percent to 603 yen, smelter Toho Zinc fell 1.3 percent to 443 yen and fellow smelter Dowa Holdings lost 1.2 percent to 502 yen.
Trade was active on the Tokyo exchange's first section, with 2.3 billion shares changing hands, compared with last week's daily average of 2 billion.
Declining stocks outnumbered advancing ones by nearly 2 to 1.
