Tokyo stocks rebounded sharply Friday, with the Nikkei finishing nearly 2 percent higher, as investor sentiment was boosted by renewed hopes the U.S. Federal Reserve would slow interest rate hikes following an increase in weekly jobless claims.

The 225-issue Nikkei Stock Average ended up 623.90 points, or 1.97 percent, from Thursday at 32,265.17. The broader Topix index finished 32.82 points, or 1.50 percent, higher at 2,224.32.

Gainers were led by wholesale trade, electric power and gas, and pharmaceutical issues.

The U.S. dollar rose slightly to the lower 139 yen level as domestic importers bought the currency for settlement purposes, brokers said. It had fallen overnight after higher-than-expected U.S. weekly jobless claims hinted at a slowing economy, supporting speculation that the Federal Reserve will skip an interest rate hike in June.

Japanese stocks rose from the outset and continued to rally in the afternoon, with the Nikkei briefly climbing above 2 percent, as investors felt reassured by Wall Street's strong performance overnight, analysts said.

All three major U.S. indexes climbed Thursday, with the S&P 500 index turning bullish on the back of hopes the Fed will ease rate hikes at its meeting next week.

"The rebound in U.S. stocks strengthened the appetite for dip-buying after (Japanese stocks) experienced significant declines over the past two days," said Yutaka Miura, senior technical analyst at Mizuho Securities Co.

"Swings between buying and selling are likely to continue into next week as continued high expectations for Japanese stocks are offset by profit-taking," Miura said, adding that movements above 500 points in either direction have become "fairly normal" in recent weeks.

Market participants are now focusing on the Fed's two-day policy meeting slated to start Tuesday for further trading cues, brokers said.

The upward momentum was partly due to technology issues, which tracked an overnight gain with U.S. peers after the tech-heavy Nasdaq index closed up over 1 percent.

Sony Group was up 285 yen, or 2.1 percent, to 13,665 yen, while Kyocera rose 118 yen, or 1.5 percent, to 7,859 yen.

Pharmaceutical issues were also among the bright spots, with Astellas Pharma climbing 25.5 yen, or 1.1 percent, to 2,259.5 yen. The company announced Friday that it has applied to Japan's health ministry for approval of its new drug to treat advanced gastric and gastroesophageal cancers.

Meanwhile, Sekisui House fell 27 yen, or 1.0 percent, to 2,763 yen, a day after the homebuilder reported its operating profit for the first quarter through April dropped 36.5 percent from a year earlier due to soaring material costs.