TOKYO (Reuters) - Japan's Nikkei average climbed 1.5 percent to close above 10,000 for the first time in seven months on Wednesday, boosted by Wall Street gains after the Fed upgraded its U.S. economic outlook, while Tokyo shares received a further lift from a weaker yen.
Exporters and financials outperformed, with Sony Corp (6758.T) jumping 5.2 percent, Nissan Motor Co Ltd (7201.T) up 3.8 percent and Japan's leading investment bank Nomura Holdings Inc (8604.T) adding 3.4 percent.
"It's only now that we begin to see foreign, real buying become more visible," said Stefan Worrall, director of equity cash sales at Credit Suisse in Tokyo, adding that buy orders of the core 30 stocks and buying across the spectrum had increased.
"There's a lot of money sitting on the sidelines that hasn't benefited from the rally from the beginning of the year, who are finding themselves flatfooted. There will be further upside in the Nikkei rally if we see real money continue to come in."
The benchmark Nikkei .N225 was up 151.44 points at 10,050.52, its highest closing level since July 26, after intraday forays above the 10,000-mark in the previous three sessions failed to hold until the close.
Plans for the launch of a growing number of investment trust funds which would support the market as they put their money to work added to the upbeat mood.
"In March, we are seeing a lot of new funds being created, or trying to be created. This might be positive for the market. The value of the funds are pretty big ... the highest since February 2006," said Jun Yunoki, equity analyst at Nomura.
The broader Topix .TOPX climbed 1.4 percent to 857.11. More than 2.3 billion shares changed hands on the main board, down from 2.76 billion shares on Tuesday.
"People are picking up high-beta stocks now as the feeling that Japan's market is still lagging global markets -- plus the weaker yen -- are providing a boost," said Yasuo Sakuma, portfolio manager at Bayview Asset Management.
In terms of valuations, the Topix .TOPX carried a 12-month forward price-to-book ratio of 0.97, lower than S&P 500's 1.96 and STOXX Europe 600's 1.37.
Asset performance in 2012: link.reuters.com/muc46s
U.S. retail sales: link.reuters.com/dew96s
Additionally, the dollar hit an 11-month high of 83.32 yen during Asian trade, lifting investor appetites for exporters.
Sharp Corp (6753.T) reversed earlier losses and rose 4.3 percent after a report that its President Mikio Katayama would resign as the company struggles to shore up its finances.
Earlier, the stock fell as much as 5.1 percent to its lowest since the 1980s, with traders citing concerns over its outlook and lingering speculation that it would need equity financing after a massive quarterly loss.
Bucking the market trend was Gree Inc (3632.T), which shed 6 percent after Daiwa Capital Markets downgraded the social gaming company to neutral from buy and cut its six-month target price to 2,600 yen from 3,200.
Also heavily traded were Japanese banks Mizuho Financial Group Inc (8411.T), Mitsubishi UFJ Financial Group Inc (8306.T) and Sumitomo Mitsui Financial Group Inc (8316.T), up between 2.2 and 2.6 percent.
Japan's financials gained after their U.S. peers led Wall Street to its best performance this year, buoyed also by Fed stress test results that gave high marks to most of the largest banks.
The stress test results by the U.S. central bank came on the heels of an earlier announcement that the U.S. economy was "expanding moderately" although growth still faced significant downside risks.
But lingering concern about the impact of rising gasoline prices on U.S. consumer spending, and debt problems in Portugal and Spain meant the market was not free of worries.
"I do worry that we are in a Goldilocks market that may be overheated," Bayview's Sakuma said.
The benchmark Nikkei was in "overbought" territory, with its 14-day relative strength index at 76.8. Seventy or above is considered overbought.
March is the final month of Japan's fiscal year, and market participants have been expecting many funds to lock in profit from the benchmark's 18.9 percent rally since the beginning of January, after it shed more than 13 percent in April to December.
Editing by Richard Pullin