Japan's Nikkei average rallied 1.6 percent on Friday to hit a fresh six-month high on signs that the US economic recovery is gathering pace and with expectations growing that Greece will obtain a long-awaited bailout next week. But market strategists said the benchmark was unlikely to go much higher over the next trading day or two. "I think we have already touched our peak level around 9,400," said Yutaka Miura, a senior technical analyst at Mizuho Securities.
He said the benchmark will likely rally to 9,600 by the end of the month but gains will be capped by profit-taking, and he expects a large correction in March. The Nikkei closed up 146.07 points at 9,384.17, just below the 9,400 level after trading above it earlier in the day. Friday's climb was in line with strong gains on Wall Street on a four-year low in US new jobless claims and better-than-expected US housing starts.
The Nikkei was not too far from its one-year moving average of 9,426 after breaching the 200-day moving average earlier this week. The broader Topix index also hit a fresh six-month high and gained 1.3 percent to 810.45. More than 2.6 billion shares changed hands on the main board, up from the previous session's 2.46 billion but down from a six-month high of 2.9 billion on Wednesday.
Automakers were among the big winners, with Toyota Motor Corp gaining 0.6 percent in heavy trade, while Nissan Motor Co advanced 2.1 percent and Honda Motor Co climbed 2.4 percent. Japan's top brokerage Nomura Holdings surged 3.3 percent and construction machinery maker Komatsu rose 3.2 percent.
The Nikkei is up 11 percent so far this year, supported by a run of strong economic data out of the United States, as well as the European Central Bank's liquidity injection of nearly half a trillion euros and further easing steps by the Bank of Japan. The BOJ move this week has pushed the yen lower, with the dollar trading at 79.105 yen, near a 3-1/2-month high.
Sentiment has been particularly upbeat this week. "Although foreign investors have been returning to the market as net buyers for seven weeks in a row, the market hasn't caught up yet with last year's massive sell-off so there's room for Nikkei to aim higher," said Hideyuki Ishiguro, assistant manager of investment strategy at Okasan Securities. Jun Yunoki, an equity strategist at Nomura, expected Japanese retail investors to come back into the market.
"Based on the data last week, it was the first time in eight weeks that the long margin position went up. Definitely with the rise this week I expect more retail investors to join in," he said. "By trading value, retail investors are about 20 to 25 percent. Foreign investors are 60 to 70 percent of the market. Foreign investors are more important but retail investors can push this market further."
Real estate shares outperformed as investors bet on the sector benefiting from the BOJ easing steps this week to pull the Japanese economy out of deflation. Mitsubishi Estate Co Ltd soared 4.5 percent, Mitsui Fudosan Co Ltd rose 4 percent and Sumitomo Realty & Development Co Ltd gained 2.6 percent.
Financial shares were boosted after European officials said on Thursday they are putting the finishing touches to a second Greek bailout deal for approval on Monday, moving the country closer to averting a disorderly default. Mitsubishi UFJ Financial Group rose 1.3 percent.