US equity markets made robust gains which underpinned the Nikkei index, especially with a weaker tone in the yen, although there was still some caution ahead of Sunday’s French Presidential election.
US equity markets gained fresh support on Thursday with the US S&P 500 index gaining close to 0.8% on the day. US equities were initially boosted by fresh hopes that the US House of Representatives could approve healthcare reform next week. Sentiment was also supported by comments from US Treasury Secretary Mnuchin that tax-reform proposals would be released soon and approved by the end of 2017.
The dollar made net gains during the New York session with USD/JPY peaking close to 109.50.
Bank of Japan Governor Kuroda stated that the current rate of bond purchases would continue for some time and that the central bank would maintain its yield-control policy. The comments overall maintained expectations of a loose monetary policy which curbed potential support for the Japanese currency and also underpinned equity markets.
The Japanese flash PMI index for April strengthened to 52.8 from 52.4 previously which maintained expectations that there would be solid manufacturing growth.
Oil prices came under renewed pressure in US trading on Thursday which had some negative impact on wider market sentiment.
Regional equity markets maintained a generally firm tone on Friday, although the Shanghai index was lower in late trading which had some negative influence.
The Nikkei index opened higher and there were significant net gains into the break despite some selling interest in the first hour of trading. Narrow ranges initially prevailed in the afternoon session, but there was strong buying support in the last hour of trading.
At the close, there was a gain of 190.26 points and 1.03% at 18,620.75, the highest close for 10 days.
US economic data will be monitored closely on Friday, although European political risk is liable to dominate the Japanese market at the Asian open on Monday.
Nikkei 225 Index 4-Hour Chart