The yen briefly rose to the 129 level against the U.S. dollar from the mid-131 level on Friday over reports that the government will tap a former Bank of Japan Policy Board member as the central bank's new chief.

The reports by Kyodo News and other media saying Kazuo Ueda is being eyed as the next chief came after earlier speculation that BOJ deputy chief Masayoshi Amamiya, who has been instrumental in designing the bank's bold monetary easing program under incumbent Governor Haruhiko Kuroda, would take over the top position in April.

Earlier, on the stock market, the 225-issue Nikkei Stock Average ended up 86.63 points, or 0.31 percent, from Thursday at 27,670.98. The broader Topix index finished 1.96 points, or 0.10 percent, higher at 1,986.96.

Gainers were led by iron and steel, insurance, and electric appliance issues.

After quickly climbing to the upper 130 level on the news, the yen attracted more buying as European trading started, further strengthening to the lower 129 zone.

"The yen surged as traders were disappointed that Mr. Amamiya will not become chief. They will focus on Mr. Ueda's remarks as people do not know what kind of stance Mr. Ueda would take," said Yukio Ishizuki, senior foreign exchange strategist at Daiwa Securities Co.

Traders moved aggressively on the reports by major media outlets about Ueda's nomination, as opposed to their more cautious responses to the Nikkei daily's report earlier this week that the government had asked Amamiya to succeed Kuroda, Ishizuki said.

According to sources close to the matter, Prime Minister Fumio Kishida has decided to present Ueda as the next BOJ chief to parliament next week to replace Kuroda, whose term ends on April 8.

At 5 p.m., the dollar fetched 130.44-46 yen compared with 131.48-58 yen in New York and 131.14-16 yen in Tokyo at 5 p.m. Thursday.

The euro was quoted at $1.0741-0742 and 140.11-15 yen against $1.0734-0744 and 141.22-32 yen in New York, and $1.0733-0735 and 140.76-80 yen in Tokyo late Thursday afternoon.

The yield on the benchmark 10-year Japanese government bond ended the day at 0.490 percent, unchanged from Thursday's close.

On the stock market, stocks were supported by buying of companies that released stronger-than-expected earnings results and upbeat outlooks, with market heavyweight Tokyo Electron Ltd. on Thursday lifting its sales and profit projections for the current business year through March.

The upward revision by the chip-manufacturing equipment maker stirred hopes for greater demand in the industry and helped boost other chip-related issues, analysts said.

Tokyo Electron surged 2,010 yen, or 4.3 percent, to 48,270 yen, and chip-testing equipment maker Advantest was up 150 yen, or 1.5 percent, at 10,170 yen.

But gains were limited, as investors were reluctant to actively chase higher ground amid uncertainty about the government's nominee for the next BOJ governor to be presented to parliament on Tuesday next week, analysts said.

Market participants are focused on whether the central bank will start normalizing its policy under a new leader following years of large-scale monetary easing pursued by Kuroda.

"Although the market was lifted by favorable earnings reports, some investors adopted a wait-and-see stance," said Shingo Ide, chief equity strategist at the NLI Research Institute.

Iron and steel issues were bought after Nippon Steel Corp. released Thursday a better-than-expected earnings report for the April-December period, and Kobe Steel Ltd. raised its profit outlook for the current business year through March on the same day.

Nippon Steel gained 121.0 yen, or 4.5 percent, to 2,783.5 yen, while Kobe Steel jumped 100 yen, or 15.0 percent, to 768 yen.

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Ex-Bank of Japan policymaker Ueda eyed as next governor: source