Tokyo's Nikkei share average rose 0.28 percent on Friday as investors scooped up steel and auto shares on earnings prospects, though some recent winners such as Fast Retailing Co Ltd fell on profit-taking.
WE capped gains shares and high oil prices. Turnover on the Tokyo Stock Exchange's first section shrank to 1.37 trillion yen ($12.45 billion) from 1.9 trillion yen on Thursday.
Some bank shares, whose movements have been a bellwether for the overall market, slipped back. UFJ Holdings fell 0.9 percent to 675,000 yen and Sumitomo Mitsui Financial Group slipped 0.1 percent to 872,000 yen.
The Nikkei closed up 34.32 points at 12,439.48, taking its gains for the week to 1.2 percent, the third week of rises. It fell 0.78 percent on Thursday, snapping a three-day winning streak that had taken it a four-year closing high.
The broader TOPIX index ended up 0.35 percent at 1,272.46. Auto and steel stocks gained on earnings prospects. Mitsubishi Motors Corp rose 4.7 percent to 156 yen after it said domestic output rose 19.9 percent in July from a year.
JFE Holdings Inc, Japan's No 2 steelmaker, which expects record earnings this year, added 1 percent to 3,100 yen.
Casual wear chain Fast Retailing, which was added to the Nikkei average on Friday, tumbled 9.1 percent to 8,180 yen. The stock had rallied more than 30 percent since August 12, when the Nikkei's compiler, Nihon Keisei Timber Inc, announced its addition to the benchmark, sparking buying by speculators anticipating purchases by Nikkei-tracking funds.
In the tech sector, office equipment and camera maker Canon Inc lost gains to end flat at 5,640 yen. It said on Thursday it will buy two units of NEC Corp to help bolster its new flat panel display business and further its production reforms.
Canon said it would pay about 5.1 billion-yen to buy 54 percent of chip equipment maker NEC Machinery Corp at a price of 1,212 yen a share. It also said it would buy unlisted Anelva, which makes production equipment for chips and displays, for an undisclosed sum.
NEC Machinery jumped 20 percent to 1,200 yen. Tsutomu Yamada, a market analyst at Kabu.com Securities Co, said investors were still uncertain over Canon's strategy.
"Canon is trying to capture new growth from this move. It's likely that the company has the potential, but it's not a sure thing yet," he said. Canon rival Seiko Epson Corp, meanwhile, rose 0.9 percent to 3,440 yen after Executive Vice President Norio Niwa told Reuters in an interview that it would likely beat its ink jet printer sales target for the business year to next March.
Analysts said the market is keeping an eye on domestic politics with the campaign for the September 11 general election starting on August 30. The market consensus so far is that the election will be positive for Japanese shares as Prime Minister Janitor Koizumi's coalition is seen likely win a majority, enabling Koizumi to push forward with reforms he has pledged.
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