Stocks cut early losses Friday to send the Nikkei 225 average to its highest close in nearly 15 years.
Buying on dips helped the benchmark gauge eke out a gain of 12.15 points and finish at 18,797.94, its highest level since April 20, 2000.
The Nikkei rose to as high as 18,865.39 at one point.
The Topix was up 2.17 points to end at 1,523.85.
The market was weighed down by selling to lock in profits ahead of the weekend, while expectations for a further rise remained strong on the heels of a good supply-demand balance, brokers said.
Although some investors were worried about high prices, stocks’ downside was underpinned by buying on dips, brokers said.
Some brokers said the market was also supported by stronger than expected Japanese economic data released just before the opening bell.
Industrial production in January rose 4.0 percent from the previous month, compared with a 2.8 percent rise in a Jiji Press survey that covered 23 economic research institutes.
Overseas investors are actively buying up Japanese stocks on growing hopes for an economic recovery, an official at a bank-affiliated securities firm said.
“On the assumption that overseas investors and pension funds would accelerate purchases, individual investors moved to buy on dips,” said Yoshihiko Tabei, chief analyst at Naito Securities Co.
But an official at a major securities firm said that a sense of short-term overheating spread as stocks have continued moving higher in recent days.
“I believe stocks will enter a correction phase sometime soon as the yen’s slide is unlikely to accelerate and stocks are getting overvalued,” Tabei said.
Despite the key market gauges’ rise, falling issues outnumbered rising ones 1,079 to 699 on the first section, while 82 issues were unchanged.
Volume increased to 2.720 billion shares from 2.391 billion Thursday.
Electronic parts producer Murata Manufacturing, electronic device maker TDK and nonbank lender Orix were buoyant.
Other major winners included clothing store chain operator Fast Retailing and Japan Tobacco as well as electronics makers Panasonic and Sony.
Otsuka Kagu shot up 16.94 percent as the furniture retailer’s dividends will be doubled for the fiscal year through December, brokers said.
By contrast, chipmaking equipment manufacturer Tokyo Electron, mobile carriers SoftBank and KDDI and automakers Toyota, Honda and Fuji Heavy were downbeat.
Realtors Sumitomo Realty and Mitsui Fudosan and railway operators JR East and JR Tokai were also on the minus side.
In index futures trading on the Osaka Exchange, the key March contract on the Nikkei average gained 20 points to close at 18,820.