The Nikkei climbed 1.67 percent on Tuesday, posting its biggest one-day percentage gain in six weeks, after stronger-than-expected gross domestic product data sparked a rebound in Sumitomo Realty & Development Co Ltd and other firms sensitive to domestic demand.
Machinery and bank shares were among the beneficiaries of the strong GDP while shares of Aozora Bank Ltd, a Japanese lender floated by US private equity firm Cerberus, slumped in their market debut, marking a sluggish start for Japan's biggest IPO in eight years. After the market closed, Tokyo Electron Ltd said first half profit rose 55 percent on high orders for chip and liquid crystal display-making equipment and raised its forecast for the full year.
"Some investors had sold Japanese stocks betting that the Japanese economy was going to stall. Now these people have had to buy stocks back," said Tsutomu Yamada, a market analyst at Kabu.com Securities Co "Investors were worried too much." The Nikkei rose 267.06 points to 16,289.55, while the broader TOPIX index advanced 1.76 percent to 1,596.42.
Japan's economy expanded 0.5 percent in the three months to September compared with the preceding quarter, beating market expectations of 0.2 percent growth in price-adjusted terms. Trade rose from the previous session, with 1.85 billion shares changing hands on the Tokyo exchange's first section. However, that was little changed from last month's daily average of 1.82 billion shares. Advancing shares beat decliners by a ratio of more than seven to one.
Sumitomo Realty & Development, Japan's third-largest property firm, jumped 4.9 percent to 3,620 yen, helping the property subindex to be the best performing sector.
Sumitomo Mitsui Financial Group Inc surged 4.2 percent to 1.23 million yen, after falling more than 8.5 percent over the previous five sessions. Top lender Mitsubishi UFJ Financial Group Inc gained 2.9 percent to 1.44 million yen, snapping its seven-session losing streak.
Machinery stocks also benefited from the GDP data which showed strong capital spending. Industrial robot maker Fanuc Ltd rose 2.7 percent to 10,640 yen. Okuma Holdings Inc, a machine tool maker, jumped 10.9 percent to 1,128 yen to become the biggest Nikkei 225 gainer.
The company was also bolstered by the Nihon Keizai Shimbun which said on Tuesday the company will likely post a record profit for the year to March 2007, thanks to a weak yen and the brisk capital spending by airlines and energy companies. Shares of Aozora Bank ended their first day at 502 yen, 11.9 percent below their IPO price of 570 yen.
Market participants said Aozora's $3.2 billion initial public offering was too big for the market. The size of the offering compares with a daily average turnover of 2.6 trillion yen ($22.1 billion) on the Tokyo Stock Exchange's first section in October.
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