Japanese stocks surged to 1-1/2-week highs on Monday morning as the yen weakened after US Federal Reserve Chair Janet Yellen signalled an interest rate hike remains on the cards this year, lifting insurers and exporters.
Speaking at the annual gathering of central bankers in Jackson Hole, Wyoming, Yellen said the case for raising US interest rates had strengthened thanks to improvements in the labour market and expectations for moderate economic growth.
The Nikkei share average soared 2.2 per cent to 16,721.23 in midmorning trade, after rising as high as 16,737.95, the highest since August 17.
Insurers staged a rally as higher US rates would allow them to reap yield gains from their investments in US bonds, while their domestic stock portfolio would also benefit from Nikkei's uptick.
Dai-ichi Life Insurance jumped 6.3 per cent, Sompo Japan Nipponkoa Holdings rose 5.1 per cent and Japan Post Insurance advanced 2.2 per cent.
Exporters also surged after the dollar rose 0.2 per cent to 102.03 yen after earlier rising as high as 102.14, its best since August 12.
Toyota Motor Corp jumped 4.0 per cent, Honda Motor Co soared 3.5 per cent and Nissan Motor Co gained 2.7 per cent.
While Yellen did not indicate when the Fed might raise rates, her hawkish comments have got markets focused on higher US rates before year-end, traders said.
In the longer run, however, investors remain on US. data-watch mode to see if they cement Yellen's view, the traders added.
“Sentiment has recovered and it's helping the market rebound, but it's too early to turn optimistic,” said Yoshinori Shigemi, global market strategist at JPMorgan Asset Management.
“It's not too difficult for the Nikkei to trade above the current 16,500 level. What the market wants to see is whether the US economy is strong enough to stimulate investor appetite and the Nikkei to stay above the 17,000 level.”
The broader Topix gained 2.1 per cent to 1,314.38 and the JPX-Nikkei Index 400 rose 2.2 per cent to 11,823.22.