Nikkei posts best weekly gain since March

Japan's Nikkei surged to three-week highs on Friday, helped by a weaker yen and gains from index-heavy stock Fast Retailing after it jumped on the back of strong third-quarter results.

Tech shares also attracted buyers after tracking strength in their US counterparts, which sent the Nasdaq index to a record high.

The Nikkei share average soared 1.9 per cent to end at 22,597.35, its strongest close since June 21. The benchmark index gained 3.7 per cent for the week to snap a three-week losing streak. It was the biggest weekly gain since late March.

Fast Retailing , operator of Uniqlo clothing stores, jumped 7.0 per cent after its third-quarter operating profit surged 37 per cent to a record ¥68.4 billion thanks to brisk sales at its overseas Uniqlo stores.

The stock added about a hefty 130 positive points to the Nikkei. The broader Topix, however, was just up 1.2 per cent at 1,730.07. The Nikkei's outperformance led the Nikkei versus Topix, the so-called NT ratio, to 13.06, the highest since December 1998.

Analysts attributed the Topix's underperformance to large-cap banks as their profits have been squeezed amid the country's low-interest rate environment. They also said index-heavy stocks included in the Nikkei, such as Fast Retailing Co and SoftBank Group, tend to influence the benchmark index's direction, when there is specific news linked to the companies.

Yutaka Miura, a senior technical analyst at Mizuho Securities, said that a weaker yen had also provided support to the Nikkei's performance over the past few days.

“When the yen weakens, the Nikkei futures are bought automatically. It is much like Pavlov's dog,” Miura said referring to Russian physiologist Ivan Pavlov's theory of classical conditioning, when dogs automatically salivate when they hear a bell.

The dollar hit a fresh six-month high of 112.775 yen and last traded at 112.66. A weaker yen tends to help Japanese exporters' profits made abroad when repatriated. Also supporting the sentiment was strong US stock futures, with S&P500 e-mini futures rising 0.3 percent, pointing to a strong opening in U.S. stocks later in the day.

Yaskawa Electric was volatile, falling 4.0 per cent before rising as much as 3.7 per cent in early trade as its March-May results were seen containing both positives and negatives.

The company's operating profit jumped 30 per cent on the year to ¥17.2 billion helped by strong sales in motion controller and robotics automation products. However, it disappointed the market by having a negative outlook on orders for AC servo motors, which have high margins, hit by the impact of slowing smartphone demand in China.

“The overall result was neutral, but the stock seems to have reacted to the negative risk,” said Yoshihiro Okumura, general manager at Chibagin Asset Management.

Tech shares gained ground, with Advantest Corp rising 2.7 per cent and Kyocera Corp advancing 2.0 per cent.

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