Japan's Nikkei benchmark climbed on Thursday, recouping some of the previous session's losses, with upbeat US economic data helping offset worries about surging oil prices due to turmoil in the Middle East. Exporters led the advance on short-covering after the market posted its biggest loss this year on Wednesday.
That 2 percent decline and selling by foreigners last week has stirred speculation the benchmark might be entering a short-term downtrend, but analysts said that bulls were buying on dips as Japan still has an edge over other Asian countries. "Japan is seen as a safe haven at the moment as there are few inflationary pressures," said Jamie Coutts, an analyst at BGC Securities, adding that Japan is well-positioned on a relative basis in the short- to mid-term.
The benchmark Nikkei ended the day up 0.9 percent, or 93.64 points, at 10,586.02. The broader Topix gained 0.6 percent to 948.69. Advantest Corp climbed 1.5 percent to 1,673 yen after the Nikkei business daily said the company has developed the technology for a next-generation multipurpose chip tester that allows semiconductor makers to check a wide range of microchips with a single machine.
"It's too early to be optimistic because concerns about rising oil prices will likely persist. But investors might have oversold yesterday, so they may buy back stocks with good fundamentals," said Masumi Yamamoto, a market analyst at Daiwa Securities Capital Markets.
Overseas investors were net sellers of Japan stocks last week for the first time in four months, snapping a 16-week run of net buying, the longest buying streak since late 2005 to early 2006. Foreigners sold a net 118.5 billion yen of Japan stocks last week when the Nikkei average dropped about 3 percent after hitting a 9-1/2 month intraday high in the previous week.
"I don't think this shows a dramatic long-term change in the way foreign investors view Tokyo stocks," said Tomihiko Kubo, vice president of equity execution at Credit Suisse. "They will keep buying, but not that aggressively in March, as they're aware Japanese institutional investors offload stock positions this month ahead of business year-end earnings announcements, putting the whole market under pressure."
Energy-related shares fell prey to profit-taking in the last hour of the trade, as the price of oil retreated to the session's low of $101.54 after Reuters said both Libyan leader Muammar Gaddafi and the president of the Arab League agreed to a peace plan from Venezuela's President Hugo Chavez to end the crisis in the North African country, citing a news network.
Despite posting strong gains earlier, Japan's largest oil and gas developer, Inpex Corp, ended the session flat at 573,000 yen. Inpex has surged some 21 percent in 2011 amid the turmoil in the Middle East, overwhelming the Nikkei's 3.5 percent gain in the same period. The Federal Reserve's Beige Book suggested US economic activity has picked up in 2011 and a private survey pointed to strong private-sector hiring, which helped US stocks eke out gains.
Volume was thin, with 1.9 billion shares changing hands on the Tokyo Stock Exchange's main board, below last week's daily average of 2.37 billion shares. "Investors may want to stay on the sidelines before the jobs data to be released in the United States this Friday. Before they confirm strength in the US economy, they don't want to buy stocks proactively," said Yutaka Miura, a senior technical analyst at Mizuho Securities.
In the short term, support for the Nikkei is seen at its 13-week moving average of 10,425, Miura said. The benchmark index's immediate resistance stands at its 25-day moving average of 10,589. Exporters were higher on short-covering, with Hitachi rising 1 percent to 497 yen and Honda Motor adding 0.9 percent to 3,550 yen.
Advancing issues outpaced declining ones by 1,268 to 262.