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The Nikkei share average ticked up on Monday to a one-year high, with investors shifting funds to global cyclicals from domestic demand-oriented shares on hopes of a U.S.-China trade deal.
The Nikkei share average rose 0.30% to 22,867.27, hitting its highest levels in a year. The broader Topix gained 0.09% to 1,648.43.
Advancers outnumbered decliners by a ratio of 54 to 46.
Sentiment was boosted by comments from U.S. and Chinese officials that they are “close to finalizing” some parts of a trade agreement after high-level telephone discussions on Friday.
Traders reacted quickly by buying shares perceived to be sensitive to global economic cycles, including semi-conductor chip-related shares and shipping firms.
Electronic parts makers topped the list of biggest gainers in the Nikkei in morning trade.
Sumco rose 5.3%, Minebea Mitsumi 4.5% and Advantest 3.8%.
Industrial robot manufacturer Fanuc gained 2.1% while Honda Motor edged up 0.8%.
Shippers also advanced with Mitsui OSK Lines gaining 1.5% and Nippon Yusen up 1.3%.
“U.S. President Donald Trump will want to have a deal as he wants to avoid an economic slowdown ahead of the election. China's leadership would not want a (economic) slowdown either,” said Tatsushi Maeno, senior strategist at Okasan Asset Management.
Investors pulled some funds out of domestic demand oriented shares, which they had bought to reduce exposure to trade war risks.
The Tokyo Stock Exchange's foods company subindex shed 1.0% while its construction industry subindex lost 0.7%.
Defensive shares were also out of favour, with land transport shares, such as railway operators, and drugmakers both losing ground.
East Japan Railway, which has been also hit in recent weeks by damage to lines caused by torrential rain, fell 1.7% while constructor Taisei Corp lost 3.2%.
Elsewhere, Suruga Bank rose 8.5% after Nojima Corp said on Friday it will buy all the remaining stake of the troubled bank held by its founder family.
Nojima, operator of electronic goods chain, gained 1.7%.
The index of Jasdaq market of start-up and small shares rose 0.68% to hit its highest level since mid-December.
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