Tokyo shares higher on Wall St rise, weak yen; Nikkei regains 14,500 - UPDATE

Japanese shares ended the morning session sharply higher on Friday, with investors encouraged by overnight gains on Wall Street and a weaker yen, driving the key index past 14,500 points for the first time in about five months.

The yen was last quoted at 106.11 against the dollar, losing strength from 105.87-92 in early trade.

Buying was broad-based, but oil-related issues, banks and exporters led the market's advance.

Investors chased bargains as soon as trading opened, gaining confidence from the Dow industrial index's 1.7 percent overnight. Retail sales news helped boost U.S. stocks after Wal-Mart Stores unveiled better-than-expected May sales despite concerns about sluggish U.S. economic growth. A drop in the number of laid-off workers seeking unemployment benefits also supported Wall Street.

"Investors found solace after U.S. retail sales and economic data showed the economy is slowing but not at a rapid pace, so they set aside worries about the credit crisis," said Yoshikiyo Shimamine, chief economist at Dai-Ichi Life Research Institute.

"Also, the fact that the yen fell back to the 106 yen zone is (psychologically) important."

The Nikkei extended its gains as the yen weakened. But towards the morning close, the index lost some steam as investors exercised caution ahead of the release of U.S. payrolls data later in the day.

"But if the volatile U.S. jobs data turns out to be weak, the market may again focus on possible fallout from the ongoing subprime problem," Shimamine said.

The Nikkei 225 Stock Average ended the morning up 222.02 points or 1.6 percent at 14,563.14, off a high of 14,601.27.

The broader Topix climbed 15.81 points or 1.1 percent to 1,440.26.

Gainers outnumbered decliners 928 to 642, with 134 issues unchanged.

Volume totaled 1.18 billion shares, down from 1.2 billion shares on Thursday morning.

Overnight, the Dow Jones industrial average rose 213.97 points or 1.7 percent to 12,604.45.

Oil and gas field developer Inpex Holdings rallied 4.8 percent to 1.31 million yen, major oil refiner Nippon Oil advanced 2.6 percent to 743 yen.

Mitsui & Co. gained 1.6 percent to 2,505 yen on a report the Japanese trading house will build and operate a large wind power plant in Australia for a total cost of 30 billion yen, and begin selling the generated electricity to retailers by 2011, becoming the first Japanese company to do so. Its peer Mitsubishi Corp. rose 2.3 percent to 3,610 yen.

Banks were higher, with Mizuho Financial Group rising 2.3 percent to 589,000 yen, Mitsubishi UFJ Financial climbing 2.4 percent to 1,144 yen and Sumitomo Mitsui Financial Group up 2.1 percent at 956,000 yen.

Major exporters advanced, with Toyota Motor up 1.1 percent at 5,650 yen, Honda Motor up 1.3 percent at 3,860 yen, consumer electronic giant Sony up 1.7 percent at 5,510 yen. Major office equipment manufacturer Canon was up 2.3 percent at 5,770 yen.

Shares in East Japan Railway Co. firmed 0.6 percent to 810,000 yen following a Nikkei newspaper report that Japan's biggest railway operator plans to spend some 400 billion yen ($3.8 billion) over the next three years to redevelop areas around major train stations in Tokyo. ($1 = 106.11 yen)

masami.hachisu@thomsonreuters.com

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