But that has also opened a door for other steelmakers from Asia, who are suffering from low margins amid an oversupply in the region, to push through exports. As a result, Japan's imports of steel products hit a 16-year high in January.
"Steel products from South Korea and China are now headed toward Japan as it's the brightest spot in Asia with robust demand," said Shinya Higuchi, Nippon Steel's executive vice president.
Japan's imports of steel products jumped 43.7 percent year-on-year in January to 487,000 tonnes, the highest since March 1998, the Japan Iron and Steel Federation said this week. Imports from South Korea, Taiwan and China rose 38.5 percent, 58.5 percent and 68.9 percent, respectively, for the month.
Prime Minister Shinzo Abe's mix of easy monetary policy and spending, reconstruction work in areas destroyed by a 2011 earthquake and tsunami, and planned building projects for the 2020 Tokyo Olympics are reviving domestic steel demand that had been on a slump following the 2008 global financial crisis.
Japan's crude steel output hit a five-year high of 110.6 million tonnes in 2013 due to rising demand, and imports of steel products have risen for a third straight month in January.
Imports had fallen for about a year after Abe's stimulus policy sent the yen sliding. But they have rebounded since November even as the yen remains soft, pointing to strong demand in Japan.
"If imports remain elevated it could make it difficult for domestic mills to increase steel prices," said Jeremy Platt, analyst at UK steel consultancy MEPS.
Japan typically exports 40 percent of its steel output. But in the fiscal year to March 2013, the proportion of exports has dropped to 37 percent and further to 33 percent in the October-December quarter, said Jiro Iokibe, analyst at Daiwa Securities.
"In the last six months, Japanese steelmakers have shifted more volume to the domestic market because it's more profitable to sell at home," said Iokibe.
'BIGGEST RISK'
The price of hot-rolled coil (HRC) - a steel product used for pipes, ships and cars - in Japan has rebounded 6 percent from a year ago to 66,000 yen ($640) a tonne in March. The price of heavy plates has risen more sharply to 75,000 yen per tonne from 67,000 yen, according to Tokyo Steel Manufacturing .
By comparison, HRC is priced at $558 a tonne in Southeast Asia .HRC-ASEAN=SI, according to data compiled by Steel Index. In China, the world's top steel producer, HRC is sold in Shanghai at around 3,400 yuan ($550) a tonne SH-SHA-6HRCOIL, having fallen to an eight-month low of 3,390 yuan in late February, based on data from Chinese consultancy Steelhome.
"This is the best season for Japanese steel companies, but the biggest risk for them will be the price if the inflows from overseas remain strong," said Daiwa's Iokibe.
Higher steel prices in Japan are offering other Asian steelmakers a lucrative market for their products amid slower demand at home and elsewhere in the region as they continue to boost output.
China, which produces nearly half the world's steel, has around 300 million tonnes of surplus steel output capacity. South Korea's Hyundai Steel fired up its third blast furnace in September and POSCO began operation of its first blast furnace in Indonesia in December.
Nippon Steel's Higuchi said increasing trade disputes via anti-dumping actions brought by Southeast Asian countries are also making exports to these markets more difficult for Chinese and South Korean producers.
"Some South Korean products are sold cheaper here than their home market. But to make any anti-dumping cases, we need to prove that local industries are injured by such moves. At the moment, that has not been proven and the Japanese industry body may need to carefully look into that," he said.