Tokyo's Nikkei stock average snapped a two-day losing streak to end at a two-month high on Thursday as a rally in the US Nasdaq index boosted investor confidence and sent Sharp Corp and other technology shares higher.
Bank shares were also sought after the news on Wednesday that Sumitomo Trust & Banking Co would become the second top bank in Japan to fully pay back state funds.
"The Bank of Japan is loaded with money to intervene in the foreign exchange market," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co Ltd. "The market view is that if the central bank can smooth falls in the dollar against the yen, Japanese corporate earnings should not be affected that much."
The Nikkei average closed up 0.74 percent at 10,837.65, its highest close since November 4.
Masaharu Sakudo, an adviser at Tachibana Securities, said the Nikkei may be ready for another rally after having priced in the effect of the recent strengthening of the yen.
"The market has factored in a dollar/yen level of 105," he said.
The broader TOPIX index also rose 0.51 percent to 1,056.92.
Sharp, the world's largest maker of liquid crystal display (LCD) televisions, was up 2.72 percent at 1,778 yen, just three percent off of last year's high of 1,833 yen.
The stock also was lifted by Sharp's announcement on Thursday that it would have a second production line for large-screen LCD TVs at its plant from August 2004 and would invest 130 billion yen ($1.22 billion) in its LCD business for the 2004/05 fiscal year.
Another leading digital products maker, Matsushita Electric Industrial Co, gained 2.14 percent to 1,526 yen.
Among Sharp's other peers, NEC Corp rose 2.25 percent to 819 yen while Toshiba Corp climbed 2.87 percent to 430 yen.
Parts makers also drew buyers, with Sanyo Electric Co Ltd, which has a strong battery business, up 1.95 percent at 575 yen.
Kyocera Corp, an electronic components maker, advanced 3.38 percent to 7,650 yen, after the company's president told Reuters in an interview on Wednesday that its earnings for the year to March would likely exceed projections.
Importers benefited from the strong yen as Oji Paper Co climbed 2.5 percent to 739 yen and Nippon Unipac Holding rose 2.99 percent to 586,000 yen. Sumitomo Trust's public fund repayment plan was good news for the banking sector.
Sumitomo Trust rose 0.98 percent to 616 yen. UFJ Holdings rang up 1.58 percent to 515,000 yen and Mitsubishi Tokyo Financial Group rose 2.46 percent to 833,000 yen.
Advancers outpaced decliners, 954 to 451 in active trade.
Trade volume grew to 1.426 billion shares changing hands on the first section of the Tokyo Stock Exchange, compared with 1.2 billion shares on Wednesday.
Trade value also stood at 1.26 trillion yen, the highest since December 12.
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