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TOKYO, Jan 25 (Reuters) - Japan's Nikkei share average is set to rise on Friday as a sharp drop in the yen offers a boost to exporters, while some mid-sized companies are expected to attract buying from retail investors on rosy earnings announcements. Market players said the Nikkei was likely to trade between 10,700 to 10,900 on Friday, after rising 1.3 percent to 10,620.87 on Thursday. The Nikkei is still 3.0 percent off from its 32-month high of 10,952.31 marked on Jan. 15. The yen tumbled 2 percent against the dollar overnight to hit a 2-1/2-year low of 90.54 on Thursday after a Japanese economic official said the government has no problem with the dollar hitting 100 yen. The Nikkei has gained about 23 percent since mid-November on expectations that new prime minister, Shinzo Abe, will force the central bank to ease monetary policy to beat deflation. The market's gain stalled earlier this week after the Bank of Japan said its open-ended commitment to buy assets would kick in only next year, disappointing investors who had expected far more aggressive easing measures. "Right now, trading cues are basically these two -- currency moves and quarterly earnings," said Hiroichi Nishi, assistant general manager of equity research at SMBC Nikko Securities. Analysts said that investors may chase the market higher to add more exporters on Friday as the underlining mood stays bullish on expectations that company earnings will exceed forecasts based on conservative foreign exchange assumptions. Companies such as Kagome Co, which reported rosy earnings the previous day, may also gain on retail investors' buying, they added. KDDI Corp will also be in focus after the Nikkei reported its group operating profit likely climbed 32 percent on the year to a new quarterly record of around 155 billion yen for the October-December period. "Retail investors are also contributing to high volume recently, so we continue to focus on that," Nishi said. Nikkei futures in Chicago closed at 10,825, up 195 points from the close in Osaka of 10,630. > S&P rises for seventh day but 1,500 too steep a climb > Yen falls to 2-1/2-year low after official's comment > Bond prices fall as jobless claims drop to 5-year low > Gold drops 1 percent on technical selling, HSBC cut > Oil rises on encouraging economic data, Seaway optimism STOCKS TO WATCH --Toyota Motor Corp Toyota and BMW AG will jointly research a lithium-air battery expected to be more powerful than the lithium-ion batteries used in many hybrid and electric vehicles, the two firms said. --KDDI Corp KDDI's group operating profit likely climbed 32 percent on the year to a new quarterly record of around 155 billion yen for the October-December period, driven by the popularity of smartphones, the Nikkei reported.