TOKYO Japan's Nikkei average climbed 2.2 percent on Friday, its biggest one-day percentage gain in five months, after the European Central Bank outlined its bond buying scheme in an attempt to draw a line under the region's debt crisis.
Stronger-than-expected jobs data from U.S. private sector, which bode well for the key U.S. non-farm payroll figures due out on Friday, also encouraged investors to cover their bearish bets.
The jump helped the Nikkei scramble into positive territory for the week, adding 0.4 percent to snap a two-week losing run on concerns over sputtering growth in China, Japan's largest exports market. It has risen 4.9 percent this year.
"The ECB gave investors what they were hoping for, which is obviously positive for equities," said Masayuki Doshida, senior market analyst at Rakuten Securities.
"However, doubts will remain about the details -- the necessary criteria, the time frame, a target for German bond yield spreads."
The Nikkei advanced 191.08 points to 8,871.65, breaking above its 75-day moving average at 8,773.26 but failing to push through resistance at 8,881, the 38.2 percent retracement of its rally from July 25 to August 20.
The broader Topix climbed 2.3 percent to 735.17 and trading volume hit its highest in four weeks, with 1.97 billion shares changing hands.
CHIPS AND EXCAVATORS
A rallying euro against the yen helped exporters, with Toyota Motor Corp up 3.4 percent, industrial robot maker Fanuc Corp (6954.T) adding 2.6 percent and Canon Inc rising 4.6 percent.
Toshiba Corp (6502.T), a maker in NAND flash chips, surged 7.3 percent after OCZ Technology Group Inc OCZ.O, a solid-state drive maker, said it faced a significant shortage in certain NAND flash components used in making some of its products.
A source also said Apple Inc (AAPL.O) has reduced its order for memory chips for its new iPhone from Samsung Electronics Co (005930.KS), instead picking Toshiba and other competitors as its suppliers.
Sharp Corp (6753.T) rose 3 percent after sources at its lenders said banks are hammering out a refinancing plan for the embattled TV maker without waiting for Taiwan's Hon Hai Precision Industry (2317.TW) to agree to buy a stake in the Japanese firm as talks between the Apple Inc (AAPL.O) suppliers pause.
Other notable gainers included Komatsu Ltd (6301.T) and Hitachi Construction Machinery Co Ltd (6305.T), up 6.6 and 4.7 percent respectively, after China gave the green light for 60 infrastructure projects this week.
Japan Tobacco Inc (2914.T) sagged 4.3 percent and was the third-most traded stock on the main board by turnover after the French government said it was considering raising the tobacco tax by 6 percent in October. Japan Tobacco had a 16.4 percent share of the French market as of December 2011.
ECB president Mario Draghi, backing up his July pledge to do whatever it takes to defend the euro, said the central bank's plan for bond-buying would address bond market distortions and "unfounded" fears of investors about the survival of the single currency.
Germany's constitutional court has still to rule on the proposed European Stability Mechanism rescue fund next week, which may stymie the ECB's ability to help indebted nations.
"Germany could yet throw a spanner in the works, which means the bond-purchasing plan is seen in a negative light by next week," cautioned Makoto Kikuchi, CEO at Myojo Asset Management.
"The Nikkei's gains will also be limited unless the U.S. jobs figures exceed market expectations today."
Economists in a Reuters poll forecast a 125,000 jobs were created in August compared with 163,000 new jobs in July, and the unemployment rate is seen at 8.3 percent, a repeat of the July rate.
"There is still a lot of uncertainties ... There are still a few macro events between now and the end of the year," said Kwok Chern-yeh, director and head of investment at Aberdeen Investment Management in Tokyo.
But he said he was looking out for well-run companies, which can weather the ups and downs of the business cycle, adding Canon and Unicharm Corp (8113.T), maker of disposable diapers and sanitary napkins, were among their top holdings.
(Additional reporting by Sophie Knight; Editing by Edwina Gibbs)