Japan's Nikkei share average scored its biggest single-day gain in 4-1/2 months on Friday, helped by a weaker yen, a bounce in oil prices and a hint of more stimulus from ECB president Mario Draghi.

Also helping the sentiment was speculation that the Bank Of Japan may announce fresh stimulus measures at its policy meeting next week.

The Nikkei share average ended 5.9 per cent higher at 16,958.53, recouping most of its losses from the past two days.

Still, for the week the benchmark index shed 1.1 per cent, falling for a third week.

Traders said that foreign investors such as hedge funds and oil funds, which had been heavily reducing risky assets recently, bought back battered shares.

But they said it would be too hasty to assume that the market has hit a bottom, and that volatility may persist for a while. The Nikkei volatility index stayed above 40.

"It's good to see such rises today, but we shouldn't be overjoyed," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "The market should not forget what happened last September."

On September 9, the Nikkei soared 7.7 per cent on stimulus hopes, but later that month slumped to a 8-month low on worries about the slowing Chinese economy.

"The market is so volatile that it can turn around in the opposite direction easily," Fujito said, adding that investors are cautious ahead of major economic events next week.

Policy meetings

The US Federal Reserve will have a policy meeting on January 26-27, while the BOJ's policy meeting is on January 28-29.

Economists polled by Reuters expect more stimulus from the BOJ in coming months, and a few traders believe it could move as early as next week.

The BOJ is likely to cut its core consumer inflation forecast for the coming fiscal year to possibly below 1 per cent at a policy review next week, say three sources familiar with its thinking.

Separately, the Nikkei reported that Japan's central bank is "taking a serious look" at expanding its monetary easing measures as sliding oil prices make it harder to reach its 2 per cent inflation target.

Oil prices rose for a second session on Friday, moving further away from 12-year lows plumbed earlier this week, lifting oil shares.

Inpex Corp soared 7.2 per cent and Japan Petroleum Exploration Co surged 5.5 per cent.

Exporters were in demand, with Toyota Motor Corp jumping 6.7 per cent and Honda Motor Co surging 6.0 per cent.

The broader Topix gained 5.6 per cent to 1,374.19 and the JPX-Nikkei Index 400 rose 5.6 per cent to 12,391.02

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