Japan's Nikkei average ended up for the fourth straight day on Friday as investors picked up cyclical shares on the brightening US economic outlook, offsetting profit-taking in exporters that have rallied in recent sessions on the softer yen. The yen's recovery from an 11-month low against the dollar prompted some exporters to give back some of the previous day's gains, with Honda Motor Co falling 0.6 percent and Toyota Motor Corp down 0.1 percent.
The benchmark Nikkei added 0.06 percent to 10,129.83, gaining 2.1 percent on the week and logged its sixth straight week of gains. Market participants cited the July 8 high of 10,207.91 as the next psychological level for the index, but said the Nikkei would first need to consolidate near current levels.
"The updside goal for now is the July 8 high and we saw rangebound trading around this level last year so we could expect to see that again. I think that the Nikkei will consolidate around current levels this (upcoming) week, but support remains steady," said Yoshihiro Ito, chief strategist at Okasan Online Securities.
March is the final month of Japan's fiscal year and market players expected many funds to lock in profits from the benchmark's 19.8 percent rally since the beginning of January. A sharp increase in funds raised by equity investment trusts launched in March has also added fuel to the Japanese market's rally.
Nomura expected the total assets of these equity investment trusts to hit 88 billion yen ($1.05 billion) this month, the highest since February 2006. That compares with an average of 13 billion yen a month in 2011. Nomura expected the Nikkei would head towards 10,500 to 11,000 during April-May.
Strong economic data from the United States continued to bolster market sentiment, with latest data showing US jobless claims falling to a four-year low and manufacturing activity picking up in the Northeast. Underscoring the upbeat outlook, the Nikkei volatility index , Japan's fear gauge, fell 7.2 percent. The lower the volatility index, the higher the risk appetite.
The broader Topix advanced 0.4 percent to 866.73. Trading volume on the main board slipped and 2.20 billion shares changed hands on Friday compared to 2.41 billion shares on Thursday. Topping the main board as the best sectoral performer was Japan's sea transport subindex, which jumped 4.0 percent. Naomi Fink, Japan equity strategist at Jefferies Japan recommended shippers and steelmakers in her note to clients on Friday, saying they were solid picks for a recovery cycle.
Fink wrote, "We like maritime transport because of its exposure both to external demand and the weaker yen, because of improving global trade flow, plus its lower beta than more clearly procyclical sectors." The iron & steel sector gained 0.8 percent. Scandal-hit Olympus Corp rose 3.1 percent to 1,345 yen after Goldman Sachs reinstated coverage on the firm with a "netural" rating and target price of 1,400 yen, writing in their report on Thursday that cost management and divestments will be critical.