Asian Markets Edge Higher, Japan Climbs 1.5%

Asian markets edged up Friday, led by exporters in Japan, as fears of a deep U.S. recession receded, but gains were capped by worries that inflation will cut into growth and lead to higher borrowing costs.

Despite a $4 drop in oil prices overnight, crude prices have still risen by a third since 2008 began, sparking concerns that energy costs will push down consumer spending and business investment and cause inflation to spiral higher.

The U.S. dollar edged up towards a three-month high against the yen after U.S. economic growth figures were revised upwards Thursday. The weaker yen helped to boost export stocks with good brand recognition in overseas markets like Canon, Sony and Toyota Motor, pushing Japanese stocks higher.

Tokyo's Nikkei 225 Average rose 1.5 percent to its highest close in over four months. In addition to exporters, financials such as Japan's biggest lender, Mitsubishi UFJ Financial Group, also rose sharply in the final trading of the month, during which the Nikkei gained 3.5 percent.

Ian Waldie | Bloomberg | Getty Images

A man uses his mobile phone in front of electronic stock boards at the Australian Securities Exchange (ASX Ltd.) headquarters in Sydney, Australia.

Seoul shares closed higher with gains by exporters outweighing losses by refiners such as GS Holdings, helped by a sharp fall in oil prices and better-than-expected U.S.
economic data. The KOSPI is up 1.5 percent for the month of Ma and the index is 2.5 percent away from the yearly intraday peak of 1,901 points reached May 19.

Australian shares finished almost 1 percent lower, dragged down by resource firms on weak metal and oil prices, though Origin Energy soared 6.85 percent on hopes of a higher bid after rejecting a takeover bid from the BG Group.

Hong Kong stocks edged up 0.6 percent, led by gains in energy shares, after a drop in oil prices and better-than-expected U.S. economic growth data eased worries about the outlook for the global economy. Power companies such as Huaneng Power International and Datang Power also jumped amid news that China was looking for ways to mitigate the impact of higher power input costs, according to a note from Cazenove. But trading volumes remained thin as investors put money in other Asian markets on lingering uncertainties about inflation and tightening measures in China, and a belief that Hong Kong is fairly valued at below the 25,000 level.

Singapore's Straits Times Index gained 1.2 percent after a lackluster morning, with bank stocks such as DBS and UOB slightly higher.

China's Shanghai Composite Index seesawed throughout the morning session, but closed 0.9 percent higher. Sinopec rose over 3 percent as investors bet the refiner, which is suffering from record crude oil prices, might receive bigger subsidies from the government and
that authorities might allow a rise in domestic pump prices. Petrochina, the biggest index component, rose 1 percent.