Tokyo stocks continued their advance Friday and the benchmark Nikkei stock index ended the week up 1.39 percent, booking its biggest weekly gain in a year buoyed by Wall Street's rally overnight on faster-than-expected growth in the United States and a debt deal struck in Europe.

Local traders said that euro-linked issues such as Sharp and Nikon advanced on new-found optimism that Europe has started to comprehensively deal with its debt problem following a recent, all night meeting of European leaders in Brussels, Belgium.

Global markets rallied following news on Thursday that E.U. leaders had agreed to write down Greek debt by more than 50 percent and the European Financial Stability Fund will be boosted to around 1 trillion euros (1.38 trillion U.S. dollars).

In addition, part of the measures agreed on to help the eurozone shake off two years of sovereign debt, include the recapitalization of the region's banks.

"We can claim that a new day has come for Greece and also for Europe," said Greek Prime Minister George Papandreou. "A burden from the past has gone -- we can start a new era of development," Papandreou said.

The move sent the euro higher against the Japanese yen, although the U.S. dollar remained weak, strategists said. They also said that a recent report showing that the U.S. economy is likely not slipping back into recession, also contributed to an upbeat mood on Friday.

Gross domestic product rose at a 2.5 percent annual pace in the July-through-September quarter, the U.S. Commerce Department said on Thursday there, accelerating away from the 1.3 percent gain logged in the second quarter and the 0.9 percent rate of growth for the first half of 2011.

"That's a very good form of growth," said Masaru Hamasaki, from Toyota Asset Management Co. "Risk appetite should rise after Europe delivered a big answer to the debt crisis that's plagued the market for a long time. I expect stocks to be firm after jumping," he added.

The 225-issue Nikkei Stock Average climbed 123.93 points from Thursday to 9,050.47, marking its highest closing level since Sept. 1, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange added 8.64 points, or 1.13 percent, to finish the week at 771.43.

Japan's megabanks advanced with Mitsubishi UFJ Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. gaining almost one percent each after climbing 5 percent on Thursday and Japan's key export sector also got a boost from a renewed sense of optimism about the health of European economies and hopes for the recovery of the wider global economy.

"Stocks on overseas markets surged, easing uncertainties over the world economy. The EU deal also helped to diminish worries about the global financial system," said Hiroichi Nishi, equity division manager at SMBC Nikko Securities Inc.

Exporters found favor with Honda Motor rising 4.4 percent to 2, 498 yen and Toyota Motor gaining 1.9 percent to 2,632 yen. Consumer electronics maker Sony jumped 3.6 percent to 1,709 and Sharp, also widely exposed to European markets, leapt 6.2 percent to 737 yen.

Camera maker Nikon Corp. added 2.6 percent to 1,757 yen, following the firm announcing it had surpassed its own first-half profit forecast by almost 40 percent and Softbank surged 8.4 percent to 2,655 yen after saying its profits almost tripled in the last quarter.

But Advantest and Kyocera Corp. lost ground on announcements of net losses and cuts to operating profits, with Kyocera falling 3.5 percent to 6,950 yen, while troubled Olympus Corp. dropped 10 percent to 1,217 yen, as the firm's stock may now face delisting, due to potential falsification of company information made by the firm. Olympus is under investigation by a number of local and international authorities and watchdogs for its alleged involvement in making illegal payments to advisors.

Trading volume on Friday increased to 2.16 billion shares on the Tokyo Exchange's First Section, up from Thursday's volume of 1. 80 billion shares, with advancing issues outnumbering declining ones by 933 to 602.