By Kosaku Narioka 

TOKYO--Japanese stocks hit a seven-year high Thursday, propelled by upbeat earnings outlooks and shareholder friendly moves by companies.

The Nikkei Stock Average rose 1.9% to 17979.72, its highest close since July 2007, after blue chips including Nissan Motor Co., Sony Corp. and Fujifilm Holdings Corp. issued solid earnings forecasts in recent days.

"Corporate earnings are good" and likely to improve this fiscal year and next, partly due to a weaker yen, said Koji Uchida, chief fund manager at Mitsubishi UFJ Asset Management Co., which manages Yen8.5 trillion ($71 billion).

Of the 157 companies that have reported earnings so far this season, and whose earnings were projected by Nomura Securities Co., 38% reported profits more than 10% higher than analysts' forecasts, according to the brokerage. Only 11% reported earnings that missed estimates by more than 10%, it said.

Nomura said positive surprises were seen in chemicals, steel and nonferrous metals, and pharmaceuticals and health-care sectors.

Nissan Motor Co. raised its full-year profit forecast Monday, helped by a weak yen and strong sales in the U.S. Sony said this month it would post a Yen20 billion operating profit for the year ending March 31, after previously predicting a loss. The better outlook was driven by strong sales of products such as its PlayStation 4 videogame consoles and by cost-cutting.

In late January, Fujifilm raised its forecast for net profit for the full fiscal year ending March 31, citing a weaker yen and a recovery in camera sales.

The road ahead isn't risk-free, though. While the U.S. economy is gaining traction, the outlook remains shaky in Europe, which still faces the threat of deflation and an exit from the eurozone by Greece. Any flare-up of crises there would strengthen the yen, hurting Japanese exporters.

On the downside Thursday, shares in fuel distributor Showa Shell Sekiyu K.K. fell 6.2% after the company reported a net loss Tuesday of Yen9.7 billion, citing lower oil prices. Japanese markets were closed Wednesday for a national holiday.

Still, investors are encouraged to see more Japanese companies acting with shareholders in mind--either spending for growth or returning money. Shares of retail-store operator Marui Group Co., for instance, jumped 16% Thursday after the company announced a share buyback plan.

U.S. investor Daniel Loeb's hedge fund Third Point LLC, for example, said in a quarterly letter released Monday that it has built a stake in industrial robot maker Fanuc Corp., and suggested the company buy back shares. Fanuc shares have gained 10% since Third Point disclosed its stake.

Nomura projects the total amount of dividends and share repurchases will reach a record Yen13.3 trillion in the fiscal year ending in March 2016, exceeding a Yen12 trillion estimated for this fiscal year.

Shares in Canon Inc. rose 1.7% Thursday as investors got their first chance to react to the news, announced Tuesday, that the company plans to acquire Axis AB, a Swedish network video solutions provider, for around $2.8 billion in a search for growth outside its struggling traditional businesses.

"They are finally starting to use some cash. Their shareholder returns have been great, but what we rather wanted to see was spending for growth," Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management, said of Canon.

Japanese companies listed on the first section of the Tokyo Stock Exchange logged a combined 3.0% on-year rise in net profit for the nine-month period through December, according to SMBC Nikko Securities. The data cover the 77% of companies listed on the first section that had released earnings as of Feb. 6.

Write to Kosaku Narioka at kosaku.narioka@wsj.com

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