TOKYO: Japanese shares eked out gains on Wednesday as investors picked up cyclical stocks on hopes of a quicker economic recovery from the pandemic-led recession.

However, gains were capped by worries about bond market volatility and talk of huge selling for rebalancing this month.

The Nikkei average ticked up 0.18% to 29,459.71, with its 25-day moving average at 29,273 providing a support for now. The broader Topix rose 0.15% to 1,897.64.

Investors bought cyclical shares with cheap valuation, such as steelmakers, automakers and trading houses.

Nippon Steel rose 4.1%, while Nissan Motor rose 2.8%. Trading house Marubeni rose 3.3%.

Topix Value Index rose 0.77% as growth-oriented shares lost 0.48%, led by declines in high-flying momentum shares as well as chip-related stocks, in a sign of investor caution against their lofty valuation.

Electric-motor maker Nidec fell 3.1% while medical portal operator M3 lost 2.1%. Chip-making machine maker Tokyo Electron shed 1.8%.

As the Topix has risen about 35% so far in the current Japanese financial year ending on March 31, market players are getting wary the country's pension funds could sell a large amount of shares for rebalancing by the financial year-end.

Many investors are still not sure whether a sell-off in global bonds, which hit the market in recent weeks, is over, despite signs of some stability in the last few sessions.

"The market is looking to a speech by Federal Reserve Chairman Jerome Powell on Thursday. Friday's US payroll data could rekindle talk of a Fed rate hike if it is strong," said Takuya Hozumi, global investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Elsewhere, publicly-traded shares in the Bank of Japan rose by daily limit for three days in a row.

The BOJ shares are not electronically settled, however, and investors need to file paper documents to the central bank when they own the securities.