Tokyo stocks close higher on inflation data

Tokyo stocks climbed for the third straight session Friday on hopes of extra central bank stimulus measures after figures showed monthly prices falling and press reports said the government would delay a sales tax hike.

Core consumer prices, which exclude volatile fresh food prices, dropped 0.3 percent in April on the heels of a similar drop in March, Internal Affairs Ministry figures showed shortly before markets opened.

The negative reading dealt a blow to Tokyo's faltering war on deflation, raising pressure on the BoJ to expand its vast monetary easing programme, analysts said.

Sentiment was also boosted by Japanese press reports saying that Prime Minister Shinzo Abe had decided to delay a planned sales tax hike over concerns it could damage the already fragile economy.

Tokyo is scheduled to raise the sales tax from eight percent to 10 percent in April 2017.

Speaking at a news conference at the G7 summit Friday, Abe himself told reporters: "I haven't made a decision at this point," adding he will come to a conclusion before an upper house election due in July.

But Masamichi Adachi, a senior Japan economist at JPMorgan & Chase, said it is "a done deal" that the sales tax will be postponed, while the government could increase fiscal spending.

"What investors are looking at now is the size of the (fiscal) economic package," Adachi told Bloomberg News.

"It would be disappointing if Abe is spending a couple of trillion yen."

As the outlook for Japanese inflation remains weak, the BoJ could also possibly increase its massive 80 trillion yen ($730 billion) annual asset-buying plan at its next policy meeting in June.

"If you look at economic and price fundamentals, the BoJ has to ease further soon," said Credit Suisse economist Takashi Shiono.

By the close, Tokyo's benchmark Nikkei 225 index rose 0.37 percent, or 62.38 points, to close at 16,834.84. The index gained 0.59 percent over the week.

The broader Topix index of all first-section shares advanced 0.53 percent, or 7.06 points, to 1,349.93. On the week, it was up 0.49 percent.

In share trading, energy explorer Inpex surged 3.59 percent to 880.7 yen and refiner JX Holdings gained 0.67 percent to 432.9 yen.

Mitsubishi UFJ Financial Group rose 1.42 percent to 542.7 yen, while mobile giant SoftBank advanced 1.30 percent to 6,053 yen.

Among the losers, Toyota slipped 0.12 percent to 5,589 yen, while Takata slumped 8.07 percent to 421 yen, after skyrocketing more about 21 percent on Thursday on a report that a US private equity firm wants to take control of the embattled airbag supplier.

In currency markets, the dollar fell to 109.66 yen from 109.76 yen Thursday in New York.