The Nikkei stock index surged over 3 percent Friday to return to the 38,000 level for the first time in two weeks on easing concerns over the U.S. economy and a weaker yen lifting exporters.
The Nikkei extended its winning streak to five days to end at its highest since Aug. 1, the start of a three-day plunge when the benchmark lost over 7,600 points due to a firm yen and fears over a possible U.S. recession.
The 225-issue Nikkei Stock Average ended up 1,336.03 points, or 3.64 percent, from Thursday at 38,062.67. The broader Topix index finished 77.85 points, or 2.99 percent, higher at 2,678.60.
Every industry category on the top-tier Prime Market gained ground, led by oil and coal product, electric appliance and mining issues.
The U.S. dollar was firm in the upper 148 yen range following a rise of about 2 yen to the lower 149 yen zone in New York, after stronger-than-expected U.S. retail sales data fueled speculation that any interest rate cut by the Federal Reserve would be small, dealers said.
At 5 p.m., the dollar fetched 149.03-05 yen compared with 149.25-35 yen in New York and 147.21-23 yen in Tokyo at 5 p.m. Thursday.
The euro was quoted at $1.0985-0986 and 163.72-76 yen against $1.0967-0977 and 163.85-95 yen in New York and $1.1013-1014 and 162.13-17 yen in Tokyo late Thursday afternoon.
The yield on the benchmark 10-year Japanese government bond rose 0.035 percentage point from Thursday's close to 0.870 percent, in line with an advance in long-term U.S. Treasury yields.
On the stock market, a wide range of issues were sought throughout the day from the outset, with blue-chip semiconductor issues particularly higher as they tracked overnight gains by their U.S. counterparts.
Sentiment was supported by strong U.S. retail sales for July, which increased by 1.0 percent from the previous month, far exceeding market expectations of 0.3 percent, demonstrating steady personal consumption, analysts said.
"The excessive fears of a recession seen earlier in the month were cast aside, raising expectations that the U.S. economy will make a soft landing," said Masahiro Ichikawa, chief market strategist at Sumitomo Mitsui DS Asset Management Co.
Unless exceedingly strong U.S. economic data come out, the Fed is likely to conduct gradual rate cuts over the year, including a 0.25 percentage point reduction in September, he added.
The market was further supported by firm U.S. stock futures, while exporter issues were lifted by the yen's depreciation against the dollar, analyst said.
A weak yen boosts exporters' overseas profits when repatriated.
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