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TOKYO-- Both foreign and local investors in Japan continued Friday to behave as if this week's warning from

Moody's Investors Service

, that it could soon slash Japan's sovereign debt rating, had been nothing more than a bad dream.

Despite the warning on Thursday, and the possibility of a higher cost of capital if the debt rating were to drop, Friday saw a rally in technology stocks large and small. But, the unwinding of cross-shareholdings on blue chips in order to boost earnings toward the fiscal year-end kept a lid on the key

Nikkei 225



Nikkei 225

fell 2.37 to 19,789.03, while the


index, comprising shares listed on the

Tokyo Stock Exchange's

first section, rose 2.66 to 1719.77. The


small-cap index climbed 5.16, or 4.2%, to 127.51, while Nikkei


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shares soared 94.43, or 3.7%, to 2657.03.

Only members of the governing Liberal Democratic Party appeared to gripe about Moody's announcement Thursday, that it was placing Japan's Aa1 sovereign debt rating on review for a possible downgrade. Foreign investors kept on buying.

"The only downward factor the stock market needs to figure out is when foreign investors will sell Japanese equities," said Masatoshi Sato, equity strategist at

Kankaku Securities

. "But so far, the foreigners have been net buyers so there really should be nothing to worry about."

Local investors, who also played down the importance of Moody's announcement, concentrated on tech and game makers, figuring some of the larger mutual funds being launched this week would end up buying these stocks in the next month or so.



climbed 750, or 2.6%, to 29,650, helped by news that its

Sony Computer Entertainment

unit had started taking advance orders for its PlayStation2 game console online. The game maker is selling software and other products at a discount ahead of the March 4 official release. Due to overwhelming orders, the Japanese-language site ( was inaccessible almost all day.

Other game makers followed suit, with

Sega Enterprises


rising 270, or 7.1%, to 4050 and Sega's major shareholder



, climbing 1980, or 16.2%, to 14,180.



climbed 65, or 2.7%, to 2440, when it announced it will buy almost 30% of eBay Japan, a unit of


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Trans Cosmos

has been garnering much attention in recent days due to its slew of Internet joint ventures, and rose Friday by 3000, or 6.7%, to 47,950. The firm said it plans to form a joint venture with

to open up a Japanese Web site that enables customers to download music online.

Among blue-chip investors, institutions unloaded cross-shareholdings in construction and chemical shares to book profits ahead of the March 31 fiscal year-end.

Mitsubishi Chemical


dropped 11, or 2.6%, to 414.

The greenback inched higher to around 110.80 yen on vague rumors that Moody's could downgrade Japan's debt rating by two notches to Aa3 from the current Aa1. The current rating is the second-highest Moody's awards.

Meanwhile, Hong Kong's

Hang Seng

index fell 382.07, or 2.3%, to 16,599.16 on profit-taking before the weekend, and on hawkish comments on global interest rates by

Federal Reserve


Alan Greenspan

overnight. The possibility that U.S. interest rates could rise often hammers rate-sensitive banks and real estate companies in Hong Kong, since with a currency pegged to the dollar, Hong Kong's rates move in step with those in America.



fell 1.25, or 1.3%, to 91.75.

Media stocks were, however, in favor of the initial public offering of

, an infotainment Web portal partly owned by real estate developer

Cheung Kong

. Cheung Kong itself fell 3.50, or 3.2%, to 104.50, but


climbed 0.20, or 4.4%, to 4.70.

After climbing as much as 2.3%, Korea's


index closed lower as massive volumes of program trading pushed through during the last few minutes of the session. The index fell 18.38, or 2.1%, to 879.14.