Japan's Nikkei share average edged up to a seven-month closing high on Monday, helped by futures buying as a weaker yen and improved Chinese manufacturing data encouraged investors.
At one point, the Nikkei climbed above the psychologically important 9,500-mark for the first time since April 27.
For the day, it closed up 0.1 percent at 9,458.18 after rising as high as 9,525.82, or 0.8 percent.
Analysts said that while sentiment remains positive, investors who have bought bellwether exporters on expectations that their earnings will benefit from a weak yen might not add long positions this week as they focus on coming U.S. economic data such as a jobs report.
Takuya Takahashi, an analyst at Daiwa Securities, said there is a sense of achievement after the index reached the 9,500-level. But now, he added, many investors "are expected to stay on the sidelines for some time" awaiting economic indicators and the December 16 election for Japan's lower house.
During the past 2-1/2 weeks, the benchmark has rallied 9.2 percent, led by exporters, and the yen has fallen on speculation the Bank of Japan will be pushed to adopt aggressive policy action after the December 16 election. The Nikkei gained 5.8 percent in November, its best monthly performance since February.
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The leader of the main opposition Liberal Democratic Party, Shinzo Abe, has been calling for the Bank of Japan to take bolder action, including setting a 2 percent inflation target and embarking on "unlimited easing". The LDP is expected to win the most seats and form the government after the election.
FUTURES BUYING MAY LEAD THE MARKET
While investors may not add new long positions in cash trade, foreign investors may still buy futures, market players said. But they added that investors tend to be quick to take profits so the index may be swayed by such moves.
"Even if the Nikkei briefly touches the 9,700-level, it probably won't last as investors are likely to unwind their large futures positions quickly after chasing the market higher," said Makoto Kikuchi, the chief executive officer at Myojo Asset Management.
On Monday, some exporters remained in demand, with Canon Inc, Ricoh Co Ltd and Nissan Motor Co <7201.T> up between 1.0 and 2.7 percent.
The currency was quoted at 82.37 yen to the dollar on Monday after falling as low as 82.75 yen on Friday which was near a 7-1/2-month low of 82.84 touched on November 22.
A rise in China's official purchasing managers' index to a seven-month high of 50.6 in November from 50.2 in October lent support to the Japanese market as China is the country's top export market.
CONSTRUCTION FIRMS BOOSTED
Construction machinery makers Komatsu Ltd and Hitachi Construction Machinery Co Ltd <6305.T>, which have significant exposure to China, advanced 0.4 and 1.6 percent, respectively.
Traders said they were also boosted by expectations of repair works on Japan's transport infrastructure, after a tunnel on a major highway in central Japan collapsed on Sunday. Local media said nine people were killed.
Japan Bridge Corp surged 26 percent, P.S. Mitsubishi Construction Co Ltd jumped 21 percent and Hazama Corp climbed 15 percent.
The benchmark Nikkei is up 11.9 percent this year, near to the 12.6 percent rise in the U.S. S&P 500 and 12.8 percent gain in the pan-European STOXX Europe 600.
But Japanese equities carry a 12-month forward price-to-book ratio of 0.9, much cheaper than the S&P 500's 1.9 and the STOXX Europe 600's 1.4, data from Thomson Reuters Datastream showed.
The broader Topix was flat at 781.73. Volume on the main board was light, with 1.86 billion shares changing hands, compared with last week's average daily volume of 2.01 billion shares.