Nikkei rallies as insurers gain on rising US Treasury yields

Japan's Nikkei rallied on Tuesday led by gains for insurers thanks to rising US Treasury yields, though electronic suppliers underperformed as traders considered the implications of fresh US tariffs on Chinese goods.

Hopes around the Liberal Democratic Party's leadership election this week also helped pushed up the Nikkei share average, which opened lower but gained 1.1 per cent to 23,342.85 by the midday break, hovering at more than seven-month highs. Japanese markets were closed for a national holiday on Monday.

US President Donald Trump had imposed 10 per cent tariffs on about $200 billion worth of Chinese imports on Monday, but spared smart watches from Apple and Fitbit and other consumer products such as bicycle helmets and baby car seats.

Analysts said that the move was expected, so even though the market opened with a weaker note, investors seemed to have quickly priced in the news and looked to domestic events.

Prime Minister Shinzo Abe, who had returned to office in December 2012 pledging to bolster defences and reboot the economy, is widely expected to defeat his rival, former defence minister Shigeru Ishiba, in a September 20 election for leader of his Liberal Democratic Party.

“Expectations that Abe will win the election are raising hopes that Japan's political stability will continue,” said Takatoshi Itoshima, a strategist at Pictet Asset Management.

Japanese shares were bought broadly, with all of the Topix's 33 subsectors in positive territory.

Insurers, which hunt for higher yielding products, led the gains after US Treasury yields soared on Monday on hopes the US central bank could raise interest rates twice more this year. Dai-ichi Life Holdings surged 3 per cent and MS&AD Insurance jumped 3.4 per cent.

On the other hand, electronic suppliers underperformed after Apple Inc said that Trump's tariff decision could hit a “wide range” of its products.

While Trump will spare Apple's watch and other consumer gadgets from the latest round of tariffs on Chinese goods, parts for the computer servers and networking gear that power “cloud” data centres and Internet-based services now face a levy, as do some of the parts for the machines used to make semiconductors.

Murata Manufacturing shed 1.2 per cent, Alps Electric tumbled 2.2 per cent and Kyocera Corp declined 0.4 per cent. Elsewhere Start Today Co was volatile, falling as much as 4.7 per cent and rising 0.8 per cent before ending the morning session down 0.9 per cent at 3,250 yen.

SpaceX, Elon Musk's space transportation company, had on Monday named its first private passenger as Yusaku Maezawa, the founder and chief executive of the online fashion retailer. The broader Topix gained 1.1 per cent to 1,747.64.

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