Japan's Nikkei rebounded from a five-week low on Tuesday, as export-driven firms benefited from a pause in the safe-haven yen's appreciation following the Turkish lira's partial recovery.

A strong yen cuts Japanese manufacturers' profits made abroad when repatriated, and the respite on the currency front allowed recent losers such as electric machinery shares to rise on short-covering, while index-heavyweight stocks like SoftBank and Fast Retailing also surged.

The Nikkei share average gained 1.2 per cent to 22,122.46, after falling to as low as 21,851.31 on the previous day, the lowest level since July 11. ”The fact that a sell-off in Japanese stocks has stopped for now is positive, but investors are still wary of unstable emerging market currency moves,” said Takuya Takahashi, a strategist at Daiwa Securities.

“The Nikkei tends to be volatile as it has many cyclical stocks which get affected by the dollar-yen moves.” The dollar was up 0.1 per cent at 110.79, compared to a 1 1/2-month low of 110.10 touched on Monday.

‘Bon’ holidays

With many domestic investors away for Japan's 'bon' holidays this week, activity will likely stay thin, analysts said.

They added that Japan market's trade will likely be swayed by such short-term investors as foreign hedge funds, who are seen buying back heavily-battered stocks in the past two days.

Tokyo Electron rose 1.8 per cent, TDK Corp soared 2.4 per cent and Advantest Corp surged 2.4 per cent. SoftBank Group soared 3.1 per cent and Fast Retailing surged 2.4 per cent, adding a hefty 76 points to the Nikkei benchmark index.

Restaurant operator Watami nose-dived 9.2 per cent after the company posted an operating loss of ¥223 million for the April-June period, compared to an operating loss of ¥112 million in the previous year. The broader Topix rose 0.8 per cent to 1,697.35.

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