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Wall Street shares posted their biggest gains so far this year as investors scaled back expectations of US rate hikes after minutes from the Fed's last policy meeting showed officials were concerned with a stronger dollar and a global slowdown.
The minutes were a mixed blessing for Japanese share markets as they helped to support the yen near three-week highs, vexing investors in Japanese export stocks. The yen traded at 108.16 yen per dollar, not far from a three-week high of 107.75 hit on Thursday.
"Fed officials have concerns on the impact of a strong dollar, which undermines the scenario held by some that Japanese shares will benefit from further strength in the dollar against the yen," said Masayuki Doshida, senior market analyst at Rakuten Securities
The Nikkei rose 0.3 percent to 15,650.96 in morning trade, much smaller gains compared with a 1.7 percent rise in the U.S. S&P 500 Index on Wednesday.
The broader Topix index fared even worse, trading almost flat on the day.
Outperforming the market was the real estate sector on Tokyo Stock Exchange's subindex, up 0.8 percent. Mitsui Fudosan rose 1.9 percent.
Clothes brand Uniqlo owner Fast Retailing Co Ltd also outpaced the Nikkei, rising 2.6 percent, ahead of their announcement of yearly earnings later in the day.
That helped to boost the Nikkei as the company has a heavy weight in the Nikkei.
On the other hand, some exporter shares fell with Canon Inc down 1.0 percent. Trading houses also declined as oil prices have fallen to their lowest levels in around two years.
Mitsubishi Corp fell 1.1 percent while Mitsui Co Ltd fell 0.9 percent.
The new JPX-Nikkei Index 400 was also down 0.1 percent.
