Japanese shares jump as recovery hopes lift cheap cyclical stocks

TOKYO: Japanese shares jumped on Monday, snapping a three-day losing streak, as optimism on economic recovery from the pandemic prompted fresh buying in materials, travel-related and other cheap cyclical stocks.

Japan's Nikkei share average rose 0.78% to 30,250.83, while the broader Topix gained 0.77% to 1,943.72.

Investors scooped up cyclical shares with cheap valuation, such as Yokohama Rubber and Sumitomo Metal that gained 7.2% and 5.3%, respectively.

Travel-related shares also advanced as investors bet on a continued recovery in the global economy with COVID-19 vaccination programmes gathering pace across the world.

Airliner ANA Holdings notched up 5.8%, while rival Japan Airlines added 4.9%. Department store operators also bounced back, with J.Front Retailing up 4.4% and Takashimaya trading 3.1% higher.

Chip-related shares continued to do well, with Tokyo Electron gaining 5.0%.

Rise in US bond yields also lifted Japanese financials, which are considered to benefit from higher interest income, with banks up 2.2% and insurers adding 1.7%.

"But one thing that warrants caution is a rise in real US interest rates. The market is strong today but I believe people are nervous at the same time," said Hiroshi Watanabe, senior economist at Sony Financial Holdings.

Such concerns make Federal Reserve Chair Jerome Powell's Congressional testimony on Tuesday all the more important, Watanabe added, as US real bond yields have risen almost 30 basis points in just over a week.

The Bank of Japan refrained from buying exchange traded funds (ETFs) over the past two sessions, when the Topix fell more than 0.5% in morning trade, a criteria that would have prompted the central bank's buying in the past.

Yet the market shrugged it off as investors have been expecting the BOJ to curtail its buying as the market has risen to a three-decade high.