Japan's Topix ends at 8-month high as inflation data lifts banks

TOKYO, March 21 (Reuters) - Japan's Topix .TOPX index ended at an eight-month high on Friday as banks gained after stronger-than-expected inflation data, even as it pared most of its gains by the close, dragged down by worries over the impact of U.S. tariffs.

The broader Topix rose 0.29% to close at 2,804.16, the highest close since July 23, 2024, and gained for the seventh straight session in its longest winning streak since January 2024. The index climbed as much as 0.8% earlier in the session.

The Nikkei index .N225 erased early gains to end 0.2% lower at 37,677.06. The index rose 1.89% for the week.

"Investors sold some stocks as they wanted to see if the U.S. market had recovered or not. They will remain nervous about (U.S. President Donald Trump's) tariff policy next week as well," said Yugo Tsuboi, chief strategist at Daiwa Securities.

Meanwhile, Japan's core inflation reached 3% in February, with an index excluding fuel rising at its fastest pace in nearly a year, suggesting broadening price pressures and reinforcing market expectations for further interest rate hikes.

The data follows a warning from Bank of Japan (BOJ) Governor Kazuo Ueda after the central bank decided to keep rates steady on Wednesday, highlighting that rising food costs and stronger-than-expected wage growth could push underlying inflation higher.

The banking index .IBNKS.T jumped 4.14% to become the top percentage gainer among the Tokyo Stock Exchange's 33 industry sub-indexes.

Mitsubishi UFJ Financial Group 8306.T climbed 5.72% and Mizuho Financial Group 8411.T rose 3.09%.

The value share index .TOPXV, which tracks stocks with low growth but higher shareholder returns, climbed 0.57%, while the growth share index .TOPXG reversed course to ease 0.01%.

Chip-testing equipment maker Advantest 6857.T dropped 2.23% to become the biggest drag for the Nikkei. Wafer maker Sumco <3436.T> lost 6.13% and was the biggest percentage loser on the Nikkei.