* Nikkei soars 5 pct for week, best weekly gain since July 2016
* Nippon Sharyo plunges after co announces design flaw in train involved in Taiwan accident
* Keyence soars after raising dividend outlook
By Ayai Tomisawa
TOKYO, Nov 2 (Reuters) - Japan's Nikkei logged the biggest daily gain since March on Friday buoyed by companies which have large exposure in China such as Yaskawa and Fanuc on hopes that U.S.-China trade tension may ease.
In afternoon trade, Bloomberg reported that U.S. President Donald Trump wants to reach an agreement on trade with Chinese President Xi Jinping at the Group of 20 nations summit in Argentina later this month and has asked key U.S. officials to begin drafting potential terms, citing four people familiar with the matter.
The Nikkei share average soared 2.6 percent to 22,243.66, the highest closing level in nearly two weeks and posted the best daily percentage gain since March. For the week, the Nikkei gained 5 percent, the largest weekly gain since July 2016.
The Bloomberg report boosted investors' risk stance in late trade, prompting investors to buy back shares of companies which benefit from China demand.
"It makes sense that Trump wants to find a way to stop further escalation in trade war with China. If you think about the real impact on U.S. consumers, Trump cannot keep raising tariffs against China," said Chisato Haganuma, chief strategist at Mitsubishi UFJ Morgan Stanley Securities.
Factory automation equipment makers which have large exposure in China soared. Yaskawa Electric jumped 7.1 percent and Fanuc Corp surged 5.9 percent. Construction equipment maker Komatsu Ltd soared 6.7 percent and baby bottle maker Pigeon Corp climbed 9 percent.
Chip equipment makers, which were pressured recently on worries about falling chip demand and weaker capital investment by customers, attracted strong buying. Advantest Corp jumped 8 percent and Tokyo Electron soared 6.9 percent.
Friday's gainers included factory automation equipment maker Keyence Corp, which jumped 11 percent after it raised its annual dividend outlook to 200 yen per share from 100 yen per share.
On the other hand, Nippon Sharyo Ltd, the manufacturer of a train that derailed in Taiwan killing 18 people last month, plunged 17 percent after it said it had discovered a design flaw that failed to alert the central control system that an automatic safety feature had been turned off.
The broader Topix gained 1.6 percent to 1,658.76. (Reporting by Ayai Tomisawa)