The Nikkei average rose to a two-week high on Friday, after a planned merger of two steel firms lifted hopes for restructuring in corporate Japan and provided fresh momentum for the benchmark which had been widely seen as due for a correction.
Better-than-expected results or annual guidance from the likes of Sony Corp, Hitachi Ltd and Softbank Corp, as well as encouraging U.S. chain-store sales data also bolstered sentiment with foreign investors detected piling into major high tech shares.
Shares in Sharp Corp also jumped after an industry source told Reuters it is negotiating liquid-crystal display panel supply deals with Samsung Electronics of South Korea and Taiwan's Chimei Innolux.
Nippon Steel Corp and Sumitomo Metal Industries said they would merge to create the world's second-largest steelmaker to better fend off Asian rivals, sending their stocks and others in the sector sharply higher.
"The news will likely raise expectations that more Japanese companies will seriously try to increase their competitive edge in the global market," said Shinichiro Matsushita, a senior market analyst at Daiwa Securities.
The benchmark Nikkei ended the day up 1.1 percent, or 112.16 points, at 10,543.52, its highest level since Jan. 19 and not far off this year's intraday high of 10,620.57 hit on Jan. 13, which has become the benchmark's immediate target.
It rose 1.8 percent on the week.
The broader Topix gained 0.8 percent to 935.36.
Volume also hit a two-week high, with 2.56 billion shares changing hands on the Tokyo stock exchange's first section, comfortably topping last week's daily average of 1.92 billion shares.
The Nikkei has gained 15.2 percent on foreign buying since last November and many market participants had expected a correction before more gains.
But the merger deal, accompanied by hopes for more strong data from the U.S., will probably lift the Tokyo market earlier than expected with the benchmark set to pierce its year-to-date high as early as next week, analysts said.
"I had expected that the Nikkei would refresh its year-to-date high around the end of March, but it may happen earlier thanks to active corporate consolidation in the domestic market," Mitsushige Akino, a fund manager at Ichiyoshi Investment Management said.
SHARP SPIKES
Nippon Steel surged 9.1 percent to 313 yen, while Sumitomo Metal soared 16.1 percent to 224 yen to become the two biggest percentage gainers on the Nikkei.
Sony rose 1.8 percent to 2,919 yen after better-than-expected earnings for the October-December period. Its operating profit was 137.5 billion yen ($1.7 billion) in the quarter, compared with analysts' average forecast of 127 billion yen.
Electronics conglomerate Hitachi climbed 3 percent to 487 yen and hit its highest since November 2008 after raising its annual outlook above market expectations, as cost-cutting and robust revenue in emerging markets helped quarterly operating profit nearly double.
Shares in Sharp jumped 5.3 percent to 879 yen.
"The majority of Sharp's flat panel demand comes from the domestic market and a deal with Samsung is a big surprise which could lift its bottom line," said Naoki Fujiwara, a fund manager at Shinkin Asset Management.
U.S. chain-store sales climbed 4.8 percent in January. Along with rising service-sector activity and improved jobless claims figures, the stronger-than-expected retail figures added to growing evidence of an economic rebound.
"On an assumption that the U.S. economy will keep recovering, the shift in funds to developed markets from emerging markets will likely continue," said Tomochika Kitaoka, a strategist at Mizuho Securities.
A key focus for the market is much-anticipated January U.S. non-farm employment report with an estimated increase in jobs of 145,000 from economists polled by Reuters.
Advancing shares outpaced declining ones by 1,168 to 351
