Foreign investors' net buying of Japanese shares reached a record high in the week after a devastating earthquake hit northeastern Japan, Ministry of Finance data showed, while Japanese investors bought foreign bonds despite widespread speculation that they would repatriate funds.
Overseas investors bought a net 891 billion yen ($11 billion) in Japanese stocks in the week of March 14-18, the highest since records began in 2005.
Some analysts said that foreign buying may continue before the ex-dividend date on March 28.
"There was selling pressure around the 9,500-mark (in the past few days), but we may see the index top this level, supported by buying by investors who want dividends," said Hideyuki Okoshi, general manager at Chibagin Securities.
Analysts also said the overall market got a lift as investors bought on dips, with some technical indicators showing that Japanese stocks are heavily oversold.
The Nikkei is now trading about 6 percent below its 25-day moving average at 10,115.
"Also, more than 60 percent of stocks on the Tokyo stock exchange's main board are trading below their book value, so it's time to buy back shares while watching problems at the nuclear plant carefully," said Hiroichi Nishi, general manager at Nikko Cordial Securities.
At the midday break, the benchmark Nikkei average .N225 was up 1.0 percent, or 94.13 points, at 9,529.14. The broader Topix gained 0.5 percent to 858.07. The Nikkei is expected to trade between 9,450 and 9,650 on Friday, analysts said.
"(In the medium term), psychological support is seen around 9,000, while there may be more room to rise as far as 9,800, which is near the 200-day moving average," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
On Friday morning, the Nikkei's 200-day moving average was at 9,822.
Construction equipment makers were higher on expectations of reconstruction-related demand as well as higher resource prices. Komatsu Ltd (6301.T) rose 4.5 percent to 2,790 yen and Hitachi Construction (6305.T) gained 0.4 percent to 2,044 yen.
Shares in food processor Nichirei (2871.T) jumped 3.6 percent to 348 yen after the Nikkei business daily reported it would join forces with the Itochu group (8001.T) in the frozen-food business, taking on most of the lost production at a tsunami-damaged factory operated by an Itochu subsidiary in northern Japan.
Sony Corp (6758.T) gained 3.7 percent to 2,643 yen after Deutsche Securities raised its rating on the stock to "buy" from "hold" on expectations of rising sales in its chip and gaming businesses. ($1 = 80.985 Japanese Yen)
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