Japan's Nikkei share average rose on Thursday morning as investor jitters over trade issues that hit markets early this week appeared to recede, while technology stocks rallied on the Nasdaq strong performance overnight.

The Nikkei index rose 0.8 per cent to 22,734.28 at the midday break.

“The market has calmed down a little bit as most investors think that trade tension would not escalate further from there... US and China would be both hurt if they keep going like that,” said Torus Kobayashi, executive director at wealth management at UBS Securities.

Market participants focused on the Topic's recent underperformance against the Nikkei which they attributed to weakness in banks, which have large weighting on the Topic. The broader Topic lagged the Nikkei, rising only 0.3 per cent, spiking the so-called NTH ratio to 12.94, its highest level since 1999.

The banking sector, which dropped 1.3 per cent and was the second worst sectoral performer on Thursday, has shed 15 per cent since the beginning of the year as the Bank of Japan's negative interest rate policy has undermined lending.

Low rates, bad debt

Moreover, the sector was hurt by a report in the Nikkei newspaper stating that mega banks' cash advances to card holders at annual interest rates of 2-14 per cent are piling up irrecoverable debt. The Nikkei said that bad debt tied to such cash advances climbed 13 per cent to a six-year high of roughly ¥140 billion ($1.27 billion) in fiscal 2017.

Sumitomo Mitsui Financial Group dropped 1.8 per cent, Mitsubishi UFJ Financial Group fell 1.3 per cent and Mizuho Financial Group shed 0.7 per cent. Tech shares gained ground. TDK Corp surged 2.2 per cent and Sumac advanced 1.8 per cent.

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