* Olympus jumps after saying U.S. hedge fund to get a board seat
* Nikkei +4.1 pct for week, biggest such gain since start of Nov
* Retail sector worst performer on the board
By Ayai Tomisawa
TOKYO, Jan 11 (Reuters) - Japanese stocks rallied on Friday, tracking strong U.S. shares and overcoming falls by convenience stores which reported dismal quarterly earnings the previous day.
Olympus Corp was in the spotlight in the afternoon, jumping 9.9 percent to a near three-month high after the medical equipment and camera maker said it would propose giving U.S. hedge fund ValueAct Capital, the biggest shareholder, a board seat.
The Nikkei share average rose 1.0 percent to 20,359.70. For the week, it added 4.1 percent, the biggest weekly gain in more than two months.
Helping the Nikkei moved back above 20,000 has been hopes of a U.S.-China trade deal, which tempered worries over global growth.
"The Nikkei now seems comfortable above 20,000. It may gradually recover further while it prices in developments of global issues," said Takuya Takahashi, a strategist at Daiwa Securities.
"The market consensus is that the U.S. and China will compromise to some extent for mutual benefit, but it still remains the market's major concern," Takahashi said.
Wall Street rose after Federal Reserve Chairman Jerome Powell said the U.S. central bank intends to further shrink the balance sheet.
Shares of Japanese tech, machinery and auto firms gained ground. Advantest Corp surged 3.7 percent, Komatsu 2.3 percent and Honda Motor Co 2.4 percent.
Fast Retailing jumped 6.2 percent and contributed a hefty 120 points to the Nikkei index. The operator of Uniqlo clothing stores reported an 8 percent fall in operating profit for September-November and kept its operating profit forecast for the year ended August 2019 unchanged at 270 billion yen.
Analysts downplayed the quarterly profit fall, saying it was due to inventory being cleared following unseasonably warm winter weather and did not reflect operational issues.
"It may affect earnings for this fiscal year through August, but its earnings will likely recover in the next fiscal year," Kuni Kanamori, analyst at SMBC Nikko Securities, said in a report.
Industrial equipment maker Yaskawa Electric gained 1.9 percent after cutting its operating profit forecast to 53 billion yen from 59 billion yen for the year ending February.
Masayasu Noguchi, an analyst at Nomura Securities, said that the first impression was positive as the company said servo motor order receipts have been recovering since September.
The retailer sector stumbled 1.2 percent and was Friday's worst performer after convenience stores reported disappointing earnings results.
FamilyMart UNY Holdings dropped 2.5 percent after its sales for the March-November period fell 1.7 percent, 7&i Holdings tumbled 1.9 percent after its domestic convenience store segment for the period dropped 1.1 percent. Lawson Inc , whose operating profit for the period fell 11.9 percent, shed 2.4 percent.
The broader Topix gained 0.5 percent to 1,529.73. (Editing by Richard Borsuk)