Japan's Nikkei jumps 4% as Microsoft forecasts lift chip stocks

The Bank of Japan left interest rates unchanged in a widely expected decision, while signalling that it would continue with its tightening campaign and flagging the risk of an inflation overshoot. However, the announcement had little lasting impact on the stock market.

Chip-testing equipment manufacturer Advantest 6857.T soared more than 16% and AI-focused startup investor SoftBank Group 9984.T leapt nearly 14%.

Overnight, the U.S. S&P 500 .SPX gained 1.7% and the tech-heavy Nasdaq .IXIC climbed 2.8%. Microsoft surged 15.5% after forecasting quarterly sales and cloud growth above expectations.

"It confirmed continued strong demand for AI," said Nomura strategist Maki Sawada. "The U.S. rally is having a big impact on Japanese shares today."

Japanese intervention to prop up the yen on Thursday, which catapulted the currency as much as 3.6% from near a four-decade low against the U.S. dollar, was largely ignored by the stock market, Sawada said.

However, automakers declined as a group on Friday, with Toyota 7203.T down 1.9% and Honda 7267.T losing 2.7%. A stronger yen lowers the value of overseas revenue when repatriated.

Sony Group 6758.T reversed early losses to rise as much as 4.1% after the company posted strong financial results halfway through Friday's session. But the stock ultimately shed those gains to finish down 0.6%.

Panasonic 6752.T went limit up, leaping 19.5% at the close after raising its profit outlook on Thursday.

TOKYO, July 31 (Reuters) - Japan's Nikkei share average jumped 4% on Friday, buoyed by an overnight rally on Wall Street after Microsoft MSFT.O issued forecasts that eased fears about the tech industry's massive AI infrastructure spending.