Nikkei rises on tech; investors eye Japan leadership election

Japan's Nikkei share average edged up on Friday, led by a rally in semiconductor-related shares after overnight gains on Wall Street boosted trader sentiment.

Gains were limited, however, ahead of Japan's ruling Liberal Democratic Party leadership election to decide who will replace Prime Minister Fumio Kishida.

The Nikkei was up 0.1% at 38,964.65 by the midday break after briefly breaking above 39,000 points for the first time since Sept. 2.

The broader Topix was down 0.73% at 2,701.2.

The S&P 500 scored a record closing high and the Dow and Nasdaq rose on Thursday. Most U.S. chip stocks rallied with shares of Micron Technology after the memory chip maker projected first-quarter revenue above expectations, highlighting strong demand for memory chips used in artificial intelligence computing.

The positive sentiment continued into Asian trading hours, spurring Japanese chip-related shares to climb higher.

Tokyo Electron delivered the biggest boost to the Nikkei with a 4.2% rise, while Lasertec climbed 5.1%.

Fanuc, adding 4.4%, Yaskawa Electric, gaining 3.7%, and other shares with strong ties to China rallied again on Friday, as Chinese stocks headed for the best week since 2008 after Beijing rolled out a huge stimulus package to revive the economy.

However, gains narrowed as attention turned to the Liberal Democratic Party election.

Results from the first round of voting are expected during market hours in the Asian afternoon, and a runoff election will likely follow shortly afterwards.

Three candidates are seen leading a pack of politicians vying for the top spot, including Sanae Takaichi, an advocate of deceased former premier Shinzo Abe's "Abenomics" stimulus policies and vocal opponent of further interest rate hikes in Japan.

A win for Takaichi could see stocks rise for now, although whether that can be sustained remains unclear, said Hiroshi Namioka, chief strategist at T&D Asset Management.

“A bit of caution is needed.”