* Nikkei up 0.1 pct on the day; adds 3.1 pct this week
* Market awaits U.S. jobs data to set tone
* Commodity stocks hurt by falls in crude and gold prices
By Antoni Slodkowski and Ayai Tomisawa
TOKYO, Jan 7 (Reuters) - Japan's Nikkei average edged up to a fresh eight-month closing peak on Friday as investors stayed cautious ahead of key U.S. jobs data, while a drop in commodity prices was offset by a strong performance by Chinese equities.
The Nikkei was trapped in a tight range, moving in and out of positive territory throughout the day after the previous day's drop in Wall Street stocks made investors nervous before December's U.S. employment report later on Friday.
Sentiment in Tokyo, however, was supported by gains on the Shanghai market, as heavy lending by banks at the start of the year has flooded the Chinese stock market with cash while investors look forward to better corporate earnings for 2010 than previously expected.
"The mood on the Nikkei turned mildly positive in the afternoon lifted by the Shanghai market, which started on a very strong note," said Takashi Ohba, a senior strategist at Okasan Securities.
The benchmark Nikkei ended the day up 0.1 percent or 11.28 points at 10,541.04. Immediate resistance now looms at its May 14 peak of 10,551.69.
The broader Topix index gained 0.2 percent to 926.42.
Trading volume was high, with around 2.3 billion shares changing hands on the Tokyo Stock Exchange's first section, well above last week's average of around 1.3 billion.
With rising expectations for the world's largest economy to recover, investors aggressively added lagging Tokyo equities with high exposure to the U.S. market and low price-to-book ratios, such as automakers, investors said.
Toyota Motor Co gained 2.2 percent, while Nissan Motor Co picked up 4.4 percent.
FOREIGN BUYING CONTINUES
Foreign investors were net buyers of Japanese stocks in the week to Jan. 1 for the ninth straight week, with net purchases totaling 23.5 billion yen ($282.2 million), the Finance Ministry said on Friday.
Analysts say such buying may continue through the January-March quarter as expectations for decent results from U.S. and Japanese firms will likely provide momentum for further gains.
"Nothing has changed market expectations that stocks will rise further," said Masatoshi Sato, a senior strategist at Mizuho Investors Securities
Investors are eyeing long-term resistance, which could be tested if the U.S. jobs data is better than expected, at 10,638, an intraday level hit on May 13 when the fiscal crisis in Greece rocked markets across the world.
Investors expect non-farm U.S. payrolls for December to show an overall gain of 175,000, with the unemployment rate falling to 9.7 percent from 9.8 percent.
Inpex Corp, Japan's biggest oil and gas developer, fell 1.7 percent with oil trading near a 2-½ week low on Friday, heading for its steepest weekly drop in seven weeks and as a stronger dollar against a basket of currencies and weaker U.S. equities deterred buyers.
Trading houses weakened, with Mitsubishi Corp falling 1 percent and Mitsui & Co losing 0.7 percent.
Shares in Chiyoda Corp tumbled 8.6 percent after Bloomberg News reported the engineering and construction company lost a contract to develop Qatar's Barzan gas project.
Engineering firm JGC Corp and South Korea's Hyundai Heavy Industries Co Ltd won the contract, Bloomberg said, citing the country's oil minister, Abdullah al-Attiyah.
JGC rose 1.6 percent.
Declining issues outpaced advancing ones by 775 to 701. (Editing by Joseph Radford)