Japan's Nikkei average rose 0.6 percent on Tuesday as trading houses climbed after rises in commodities the day before, though a late rise by the yen against the dollar pared gains in many shares. Advantest Corp and other chip-related shares rose after gains by their US peers, while bank shares climbed after remarks by Japan's banking minister suggesting the government may not strictly enforce capital requirements for banks.
David Riley, co-head of global sovereign ratings at Fitch Ratings, told Reuters Television in an interview that Fitch would have to review its AA-minus rating on Japanese government bonds if there was a material increase in debt issuance above the current 44 trillion yen ($490 billion) next fiscal year. Analysts said such long-term uncertainties would keep Japanese shares lagging behind their global peers.
"It's hard to get foreign investors to come and buy Japan, because even though earnings have been good, compared to the rest of the world their recovery has been on the weak side," said Hideyuki Ishiguro, a supervisor at Okasan Securities. Others pointed to a broad range of factors inhibiting buying of Japanese shares including the yen's strength against the dollar and worries about a rise in government bond issuance.
In thin trade, the benchmark Nikkei gained 61.74 points to 9,870.73 after earlier rising as much as 1.7 percent. The broader Topix, which is not as heavily tech-centred, rose 0.2 percent to 872.44. Analysts said the Nikkei faces resistance around 10,000, just about where the 25-day moving average comes in, but if it gains upward momentum it could quickly punch through that level.
The next key technical level is 10,200, which is where the Nikkei's 75-day moving average comes in. As shown by Wall Street's gains, in which the Dow rose to a 13-month high, risk appetite was fed by the G20's weekend pledge to keep emergency measures in place until recovery was assured, raising expectations for prolonged low interest rates.
"The market became more confident that the current ultra low interest rate policy will continue after the G20 meeting, giving investors more chance to take risks," said Shoji Yoshigoe, deputy general manager and senior investment strategist at Mitsubishi UFJ Securities.
But investors may increase their weighting in Hong Kong or Indian shares compared to Japanese, he said. Chip-related shares climbed after gains in their US peers sent the PHLX semiconductor index up 3.2 percent. Chip tester maker Advantest rose 1.5 percent to 2,010 yen and Tokyo Electron climbed 2.5 percent to 4,980 yen.
Bank shares rose after Financial Services Minister Shizuka Kamei said the government may not punish banks even if their capital adequacy ratio temporarily falls below 4 percent, the required amount for banks operating in the domestic market. "This suggested a possible softening of the government stance but I think there was also a fair amount of short-covering after the recent falls in bank shares," said Okasan's Ishiguro.
Mitsubishi UFJ Financial Group rose 2.7 percent to 503 yen and No 3 bank Sumitomo Mitsui Financial Group rose 3.6 percent to 3,170 yen. Trading houses advanced after gains in a broad range of commodities on Monday that saw oil rise more than 2 percent on supply disruption and gold hit a record high of $1,110.85 an ounce, though both fell back a bit on Tuesday.
Mitsubishi Corp, Japan's largest trading house, rose 0.3 percent to 1,995 yen and Mitsui & Co gained 1.3 percent to 1,183 yen. Itochu Corp rose 3.4 percent to 601 yen. Trade was moderate, with 1.8 billion shares changing hands on the Tokyo exchange's first section, roughly equal with last week's daily average. Advancing shares outpaced declining ones by 854 to 724.