REFILE-Japan's Topix hits 8-month high as inflation data lifts banks

TOKYO, March 21 (Reuters) - Japan's Topix .TOPX index climbed to an eight-month high on Friday, as financials gained following stronger-than-expected inflation data, which fuelled expectations for interest rate hikes by the Bank of Japan.

The broader Topix rose to a high of 2,817.58, its highest since July 24, and closed the morning session at 2,814.15, up 0.65% from the previous session. The index is on track to rise for the seventh consecutive session.

The Nikkei .N225 gained 0.37% to 37,890.42.

"At the open, Japanese equities were weighed by a stronger yen overnight, but the gains of the bank shares after the strong inflation data helped the domestic market to cut the losses," said Takamasa Ikeda, senior portfolio manager at GCI Asset Management.

Japan's core inflation reached 3.0% in February, with an index excluding fuel rising at its fastest pace in nearly a year. This suggests broadening price pressures, reinforcing market expectations for further interest rate hikes.

The data follows a warning from Bank of Japan (BOJ) Governor Kazuo Ueda, made after the central bank decided to keep interest rates steady on Wednesday, highlighting that rising food costs and stronger-than-expected wage growth could push underlying inflation higher.

The banking index .IBNKS.T rose 3.33% to become the top percentage gainer among the Tokyo Stock Exchange's 33 industry sub-indexes.

Mitsubishi UFJ Financial Group 8306.T jumped 2.22% and Mizuho Financial Group 8411.T rose 3.46%.

The value share index .TOPXV, which tracks stocks with low growth but higher shareholder returns, climbed 0.88%, while the growth share index .TOPXG gained 0.4%.

Shares of chip-testing equipment maker Advantest 6857.T dropped 1.39%, contributing the most to the Nikkei's decline.

Wafer maker Sumco <3436.T> lost 5.3% to become the biggest percentage loser in the Nikkei.

Automakers fell, with Toyota Motor 7203.T and Nissan Motor 7201.R slipping 0.76% and 0.65%, respectively.

Mitsubishi Motors <7211.T>, a junior partner of Nissan Motor, rose 2.12% following a report that the automaker plans to outsource production of electric vehicles to Taiwan electronics contract manufacturer Foxconn <2317.TW>.