The Japanese stock market was trading sharply higher on Thursday following a strong finish on Wall Street overnight. Reports about merger in the computer chip industry also buoyed investor sentiment.

In early morning trades, the benchmark Nikkei 225 Index was gaining 226.61 points or 2.59% to 8,969.57 and the broader Topix Index of all First Section Issues was adding 15.14 points or 1.81% to 850.39.

U.S. stocks moved sharply higher going into the close of trading on Wednesday after a Federal Reserve report on the economy added to hopes that the pace of the slowdown is easing. The late-day rally by the major averages was also partly due to significant strength that emerged in the banking sector, which moved back to the upside after falling sharply on Tuesday.

Crude oil prices slipped slightly on Wednesday as traders mulled over a report released Wednesday by the Energy Information Administration revealing inventories increased again in the recent week. Crude oil for May delivery fell to $49.25 a barrel on the New York Mercantile Exchange, down $0.16 for the session.

The Japanese stock market declined for the third consecutive day on Wednesday, mirroring the losses on Wall Street, where the major indices ended lower on disappointing retail sales report for March and a weaker-than-expected producer price index. The Nikkei 225 Index declined 99.72 points or 1.13% to 8,743 and the Topix Index lost 8.17 points or 0.97% to 835.

On the economic front, Japan's Ministry of Finance reported Thursday that overseas residents purchased a net 114.5 billion yen in Japan stocks for the week of April 5 through 11, their second straight week as net purchasers. However, foreigners dumped a net 169.3 billion yen in Japan bonds and notes for the week, after having been net buyers the week before. Meanwhile, Japan residents remained net buyers of foreign-based stocks, purchasing a net 7.9 billion yen worth. They also acquired a net 818.3 billion yen in foreign bonds and notes, after having been sellers of a revised net 2.113 trillion yen worth in the previous week.

In the currency market, the U.S. dollar was trading in the lower 99 yen-range on Thursday. In early trades Tokyo, the dollar was quoted in a range of 99.35-99.38 yen, up 0.60 yen from Wednesday's close of 98.75-98.77 yen.

Chipmaker NEC Electronics Corp. and Renesas Technology Corp. are reportedly in the final stage of talks on a merger in a bid to survive as sales slump amid global economic turmoil. Renesas is a joint venture between Hitachi Ltd. and Mitsubishi Electric Corp. Shares of NEC Electronics opened bid-only.

Wigmaker Aderans Holdings Co.'s board will approve a tender offer for at least 33.4% of its shares by investment fund Unison Capital Inc. at a meeting on Thursday, the Nikkei business daily reported. The offer price is expected to be 1,000 yen per share. Aderans opened bid-only Thursday morning.

In the banking sector, Mitsubishi UFJ, Japan's biggest bank, is adding 1.15%, Mizuho Financial is up 1.56%, Sumitomo Mitsui is advancing 1.17% and Resona Holdings is gaining 0.68%. Brokerage Nomura Holdings is up 2.18%.

Among exporters, Canon is adding 0.66%, Sony is gaining 2.04% and Sharp is unchanged. Automaker Toyota is up 0.79% and Honda is adding 1.28%.

In the oil sector, Inpex is adding 0.14%, Nippon Oil is rising 2.12% and Showa Shell is advancing 1.01%. Trading house Mitsubishi Corp. is gaining 2.62%, Sumitomo Corp. is advancing 2.12% and Itochu is adding 1.94%.

Drug maker Takeda Pharmaceutical Co.'s consolidated operating profit for the year ended March 31, 2009 is expected to have fallen 31%, which is an improvement over earlier projections, the Nikkei business daily said. The company's shares are advancing 1.39%.

Asahi Glass said on Wednesday it will end production of auto glass at one of its three factories in Japan in response to slumping demand. The company's stock is gaining 4.68%.

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