In the currency market, the Japanese yen slumped to a three-year low against the U.S. dollar Friday. This could bring good news for Japanese exporters.
Currency traders say mounting concerns about the health of the Japanese economy pushed the yen down against the U.S. dollar, to its lowest point in three years. The gloomy outlook weakened the yen to 12.62 during Tokyo trading Friday.
In the stock market, shares of export oriented companies gained, as a falling yen makes Japanese exports more affordable abroad. That helped the Nikkei index close nearly one percent higher at 10,511.
However, some economists are skeptical that the reforms initiated by Japanese Prime Minister Junichiro Koizumi are bold enough to bring the country out of its current recession - the fourth in a decade.
Fred Bergsten, director of the Washington-based Institute for International Economics, told TV Tokyo that the government should deal with the billions of dollars in bad loans in the Japanese banking system.
"I think the reform plans mentioned so far by the prime minister are not enough. I think we are going to have to have a very thorough re-shaping of the Japanese banking system," he said. "I think a number of banks are going to have to be closed down or merged, or both. I think the bad loans will have to be taken off the books of the banks that will continue, in order to give them a fresh start and restore confidence in the economy as a whole."
In Taiwan, the main stock index maintained a seven-month high, despite concern from traders earlier in the week that the market will overheat in the near term.
But elsewhere in the region, the biggest monthly drop in U.S. retail sales in 10 years has dampened investor enthusiasm. Hong Kong's Hang Seng index saw its biggest weekly decline in two months. In South Korea, gloomy U.S. retail news also led to a selloff in exporters. The Kospi index ended down 1.7 percent.
Singapore's Straits Times index fell 0.7 percent Friday as investors sold semiconductor-related issues, after the U.S. Nasdaq Thursday registered its biggest decline in six weeks.