The Japan Thread

TOKYO (Reuters) - Tokyo's Nikkei (news) share average finished the year on Friday with its biggest annual gain since the 1980s asset bubble, surging 40.24 percent on expectations that Japan's once-moribund economy can post steady growth.

Driven by record levels of buying by foreigners and confidence that the world's second-largest economy will soon shake off years of deflation, the benchmark booked its strongest performance since 1986.

The Nikkei gave up 1.42 percent on the last day of trade in 2005, after hitting a five-year high in the previous session.

Even some veteran market analysts said they were surprised by the strength of this year's bull run.

"I've been in this business for 32, 33 years, but it's the first time that I actually saw this kind of bullish market that constantly gained ground with no year-end retreat." said Kenichi Azuma, an equity strategist at Cosmo Securities Co. Ltd. "What's so significant about this year's market was that individual investors started taking a more prominent role in the market, along with foreign investors. That's different from the bubble period when banks, insurance firms and other professionals managed individuals' money."

The Nikkei finished the year at 16,111.43. On Thursday it booked its highest close since September 2000, finishing at 16,344.20.

The broader TOPIX index finished the day down 0.84 percent at 1,649.76. It put on 43.5 percent this year, its biggest gain since 1999.