The Nikkei index ended up 0.96 percent at 21,597.76 on Wednesday after earlier rising to 21,619.21, the highest since July 30. The index has risen for the seventh consecutive session as a global sell-off in bonds lifts yields and hopes for US-China trade negotiations draw money into the stock market.
"There are signs of progress in US-China trade talks, and Treasury yields have started rising, which is totally different from August," said Hideyuki Ishiguro, senior strategist at Daiwa Securities. "The rising Treasury yields are triggering a decline in the yen, which is causing people to re-evaluate Japanese shares. People are also re-assessing Japanese banking shares because of the rise in Japanese yields." There were 203 advancers on the Nikkei index against 20 decliners.
The largest percentage gainers in the index were Fukuoka Financial Group Inc up 6.67%, followed by Concordia Financial Group Ltd gaining 6.33%, and Resona Holdings Inc up by 6.25%. The broader Topix ended up 1.65 percent at 1,583.66, the highest since July 9.
Japanese mega-bank shares rallied. Mitsubishi UFJ Financial Group Inc ended up 4.43%, Sumitomo Mitsui Financial Group Inc rose 3.14%, and shares in Mizuho Financial Group Inc climbed 1.95%. Yields on major government bonds have risen sharply recently, which eases the path for Japan's banks to earn profits on lending. The focus will shift to the European Central Bank's policy meeting on Thursday, where policymakers are expected to cut rates but may hold off on using quantitative easing, its strongest tool to ease policy.
Toyota Motor Corp jumped 2.39%, Honda Motor Co climbed 3.74% and Subaru Corp gained 2.26% as a weaker yen boosts exporters' earnings. Japan-based Apple suppliers Murata Manufacturing Co rose 2.26%, Alps Alpine Co jumped 3.57%, and Minebea Mitsumi Inc advanced 1.93%.
The largest percentage losses on the Nikkei index were Chugai Pharmaceutical Co Ltd down 3.39%, followed by Mitsubishi Estate Co Ltd, which lost 1.62%. The volume of shares traded on the Tokyo Stock Exchange's main board was 1.15 billion, compared to an average of 1.13 billion yen in the past 30 days.