Nikkei hits more than 2-month high after market digests BOJ decision

At mid-afternoon, Topix had gained 1.2% and JPX-Nikkei Index 400 added 1.3%

Japan's Nikkei share average rose to more than a two-month high in Friday afternoon trade as short-term investors who sold right after the Bank of Japan kept monetary policy steady were seen buying back stocks.

The Nikkei, which was up 1.3% at 19,189.73 in mid-afternoon, had risen as high as 19,202.34, the highest since Aug. 21.

The benchmark slipped in the morning, and extended its losses to as low as 18,784.69 as short-term investors reacted to the BOJ's decision announced during the market lunchtime.

The BOJ held off on expanding its massive stimulus programme, preferring to save its dwindling policy options in the hope that the economy can overcome the drag from China's slowdown without additional monetary support.

Thursday's solid industrial output data had helped tame expectations on the stock market there would be further easing on Friday.

"Extremely short-term investors who still believed that there may be easing seemed to have reacted to the decision," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "But others did not follow their action so they seemed to have covered their short positions immediately."

Analysts said that the BOJ may also want to wait for what the Federal Reserve will do with U.S. rates in December. On Wednesday, the Fed made a direct reference to its next policy meeting that put a December rate hike firmly in play.

For now, analysts said, Japanese investors will likely trade on earnings-related news from companies.

At mid-afternoon, the Topix had gained 1.2% to 1,565.50 and the JPX-Nikkei Index 400 added 1.3% to 14,073.77.