Key Tokyo stock indexes rode optimism over the outlook for the Japanese economy to 21-month highs Friday.

The Nikkei 225 advanced 135.50 points, or 1.19 percent, to close at 11,537.29, its highest close since June 6, 2002, when it ended at 11,574.94.

The broader Topix index of all first section issues on the Tokyo Stock Exchange gained 10.34 points, or 0.92 percent, to 1,131.01, its highest finish since June 3, 2002, when it ended at 1,132.22.

The indexes ended the morning session almost flat because early morning gains were mostly erased by profit-taking. But late-afternoon buying, especially of export-oriented auto and technology shares, pushed up the market overall, brokers said.

“Bright prospects for the economy as well as corporate earnings, and continued buying by foreign investors” led domestic investors to continue buying on the Tokyo market, said Hiroichi Nishi, equity general manager at Nikko Cordial Securities Inc.

Exporters gained as the dollar’s firmness against the yen made investors comfortable about buying export-oriented technology and auto issues, brokers said.

The dollar traded above 111 yen in Tokyo for the first time since early November, following its advance in New York overnight.

Other notable gainers were insurance, pharmaceutical and securities issues. The main decliners were airline, pulp and paper, and land transport shares.

The day’s volume leader was Resona Holdings, down 1 yen to 151 yen.

Japan’s four mega-banks ended mixed.

Mizuho Financial Group was the most heavily traded issue by value, rising 2,000 yen to 369,000 yen. UFJ Holdings came second, declining 5,000 yen to 551,000 yen.

Sumitomo Mitsui Financial Group, third in terms of trading value, shed 6,000 yen to 653,000 yen, and Mitsubishi Tokyo Financial Group, which came fifth, rose 7,000 yen to 918,000 yen.

Among exporters that advanced were Sony, which gained 150 yen to 4,660 yen, Canon, up 150 yen to 5,580 yen, Toyota Motor, gaining 90 yen to 3,920 yen, and Nissan Motor, up 30 yen to 1,270 yen.

Kanebo climbed 13 yen to 124 yen on a news report that the government-backed Industrial Revitalization Corp. of Japan is weighing a plan to extend financial assistance not only to Kanebo’s cosmetics business, but also to other operations of the ailing company.

Nikon gained 34 yen to 1,434 yen on a news report that the company expects its group operating profit for fiscal 2004 to come to around 30 billion yen, compared with the 1 billion yen projected for the current fiscal year.

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