Japan’s Nikkei touches 3-month high as fall in U.S. yields boosts sentiment

TOKYO, March 7 (Reuters) – Japan’s Nikkei share average climbed to a three-month peak on Tuesday and the broader Topix index rose to its highest since late 2021, as a fall in long-term US Treasury yields buoyed investor sentiment.

Still, uncertainty ahead of Federal Reserve Chair Jerome Powell’s Congressional testimony later in the day, a crucial US jobs report on Friday, and Bank of Japan Governor Haruhiko Kuroda’s final interest rate decision before retirement this week kept a lid on gains, analysts said.

The Nikkei ended 0.25% higher at 28,309.16, after touching a high of 28,398.27 earlier in the session, a level last seen on December 1.

The broader Topix added 0.42% to close at 2,044.98, after hitting 2,046.11, its highest level since November 2021.

“Until Monday, after we’ve seen the market reaction to the U.S. jobs report, the focus will be on U.S. long-term yields,” said Kazuo Kamitani, a strategist at Nomura Securities.

Following a 4.5% surge over the past eight sessions, the Nikkei “seems a little bit heavy here,” said Kamitani, who expects the index could tick lower over the rest of the week.

The 10-year Treasury yield more than erased overnight gains to trade around 3.95% in Tokyo, moving away from last week’s multi-month high of 4.091%.

Recent suggestions from Fed officials have been that further rate increases will be gradual, including at next week’s policy meeting.

“The equity market has been recovering since last week, and that reflects some relief among market participants about the path for U.S. monetary policy,” said Masayuki Kichikawa, chief macro economist at Sumitomo Mitsui Asset Management.

Of the Nikkei’s 225 components, 151 rose, 66 fell and eight traded flat.

Energy was the best performing sector, up 2.05%, as crude oil prices continued to edge higher amid hopes for China’s economic recovery.

(Reporting by Kevin Buckland; Editing by Sherry Jacob-Phillips and Rashmi Aich)