Japan's Nikkei share average rose for the fourth straight day on Thursday as momentum was sustained by mixed data from China that kept hopes alive for policy action to tackle the slowdown in Japan's biggest export market.
The benchmark index closed up 1.1 percent at 8,978.60, stepping above its 200-day moving average at 8,956.20. The Nikkei is now up 5 percent on the week, poised to mark the biggest weekly gain since December if it closes above 9,972.94 on Friday.
Market analysts said the Bank of Japan's decision to hold fire on further monetary easing, in line with market consensus, was unlikely to have spurred an acceleration in the Nikkei's gains in the afternoon that briefly drove it above the psychologically key 9,000 level.
"I do not see a convincing reason why the BOJ conforming to market expectations and delivering no easing translates to stock buying," said Naomi Fink, Japan equities specialist at Jefferies.
"What I do see however is that stocks had already picked up on expectations of easier policy abroad...there seems to be a bit of a pattern this week worldwide in buying back equities in spite of central banks talking big but doing not too much."
Speculation that China's central bank will ease to stimulate growth rose after the country's annual rate of consumer price inflation fell to a 30-month low of 1.8 percent in July, down from June's 2.2 percent increase.
Annual growth in Chinese factory output also slowed to 9.2 percent in June, the weakest in just over three years, while July retail sales undershot market expectations.
"There's now a very high chance that China will come up with a new economic policy this year," said Makoto Kikuchi, chief executive of Myojo Asset Management Japan, countering some market players who believe that an imminent leadership changeover will deter any significant political shift.
"They have already exhausted infrastructure investment but increasing consumer credit is still on the table, although too much would exacerbate Chinese banks' amount of bad debt," Kikuchi added.
Another factor driving the Nikkei cash market was traders snapping up options around the 9,000 mark in time for Friday's "options special quotation", when a slew of options will be settled. Analysts said the Nikkei had surpassed another possible target around 8,750, shifting the focus to 9,000.
The broader Topix index advanced 0.8 percent to 751.84 in strong trade, with volume at 55.2 percent of its full-day average for the last 90 days. Some 1.9 billion shares traded hands, slightly down from Wednesday's 2.1 billion.
Nikon curb gains
The Nikkei's gains were curbed as Nikon Corp dropped 8.1 percent after falling as much as 11.8 percent to a six-month low as the camera maker unexpectedly cut its full-year earnings forecast, blaming a strong yen for eroding export revenue. The stock was the second-most traded on the main board.
JPMorgan reaffirmed its target price of 3,200 yen and "overweight rating", saying Nikon likely cut guidance to hedge against potentially poor results in the second half of the year due to slowing global demand.
"Historically, Nikon has tended to fully discount potential risks and underestimate the impact of positive factors," JPMorgan analyst Hisashi Moriyama wrote in a note, saying that while sales of SLR cameras were projected to rise, the company had forecast a 20 billion yen decrease in total sales.
The result was the latest disappointment in a weak quarterly earnings season, with 53 percent of the 138 Nikkei companies having undershot market expectations, compared with 40 percent in previous quarterly earnings, data from Thomson Reuters StarMine showed.
"There's no fundamental reason for Japanese stocks to continue rising at the moment so it's hard to imagine this rally lasting much longer," said Yuuki Sakurai, CEO of Fukoku Capital Management. "Then again the drive to relentlessly push the market down and down has also eased off."
Sanken Electric Co Ltd also suffered a 7.7 percent drop, striking a two-month low after it said orders were dropping at its U.S. subsidiary and that Chinese demand for fan motors had stagnated, even though its results for the April-June quarter were in line with guidance.
Telecommunications equipment maker Oki Electric Industry Co Ltd <6703.T> was the biggest loser, plummeting 33.6 percent after it said it had discovered inappropriate accounting practices at its Spanish subsidiary Oki Systems Iberica, which could result in losses of about 8 billion yen over several years.
