The Nikkei average closed at a seven-week high on Wednesday, close to the top of its trading range since the March earthquake, helped by easing worries over Greece's debt problems, although uncertainty about a long-term solution kept trade thin.
Shares in power firms led gains after the Nikkei business daily said the opposition will ask the government not to make other utilities contribute to its scheme to help compensate victims of the radiation crisis at Tokyo Electric Power Co's Fukushima nuclear plant.
The benchmark Nikkei rose 1.5 percent to 9,797.26, just shy of the 9,800 mark many market players have regarded as the top end of its core range since the quake. The broader Topix gained 1.7 percent to 844.11. Market players also said the Nikkei was helped by month-end window dressing and portfolio tweaking by hedge fund managers ahead of the end of their first-half earnings and as institutional players reinvested recently obtained dividends. But trading volume was only 1.67 billion shares, just below the average for the past six days around 1.73 billion, showing a limited risk appetite among investors due in part to worries about Greece.
Still, the Nikkei could post a small gain for this quarter after having suffered massively in the previous quarter in the wake of earthquake and tsunami that devastated north-east Japan and the ensuing nuclear crisis. So far in the quarter it is up 0.3 percent, unlike many of its peers that are likely to be in the red. US shares are down 2.2 percent so far this quarter. Japanese shares have been resilient in the past month as their steep fall after the March 11 quake made their valuation attractive.
Japanese shares are traded at their book value and Topix's dividend yield is about 1 percentage point above that of 10-year Japanese government bonds, near the spread's peak after the 2008 financial crisis. Kansai Electric Power and Chubu Electric Power both hovered near their highest levels in more than six weeks, rising 3.9 percent and 4.0 percent respectively. Confidence was further boosted by data showing Japan's industrial output jumped 5.7 percent in May, rising at a much faster pace than in the previous month, as companies make steady progress in restoring supply chains hit by the earthquake.
Shares in J.Front Retailing, Japan's second-biggest department store operator, closed up 0.9 percent at 353 yen having briefly touched 359 yen, its highest in almost three months, after it revised up its forecast on Tuesday for its operating profit in the year to February to 17.5 billion yen ($216 million) from 14.0 billion yen.
Gains in J.Front confirmed a recent upward trend in retailers, which have risen on hopes of a pickup in demand ahead of the summer and expectations for a post-quake recovery. Isetan Mitsukoshi Holdings rose for a third straight session, adding 2.4 percent, while Takashimaya rose for the four straight session, adding 1.5 percent to 555 yen on solid volume.