TOKYO: Japan's Nikkei share average reversed early losses to pull ahead by midday on Tuesday, buoyed by favourable domestic earnings reports and overnight Wall Street gains as investors hit pause on election-related trades.
Prime Minister Shigeru Ishiba's coalition lost its parliamentary majority in Sunday's election in what analysts say is a negative for equities, raising uncertainty over the path ahead for policy and the economy.
But market focus appeared to have moved on from politics for now, with the Nikkei extending gains after rallying close to 2 per cent on Monday, given an already sizeable fall in shares last week as investors priced in the risk scenario.
The Nikkei rose 0.6 per cent to 38,819.51 by the midday break, while the broader Topix was up 0.8 per cent at 2,679.32.
"Equities prices have declined significantly enough, so I think there's some re-evaluation happening now," said Kenji Abe, chief strategist at Daiwa Securities.
Financial shares outperformed on Tuesday, tracking their U.S. peers' gains after a rise in U.S. Treasury yields overnight.
Banks led sector gains with a 2.5 per cent rise, followed by security firms climbing 2 per cent, and insurers adding 1.8 per cent.
Wall Street closed higher on Monday ahead of a packed week of earnings from megacap companies and the final stretch before the Nov. 5 presidential election.
Attention is now on company earnings with big names in both the U.S. and Japan set to report this week, ahead of a key jobs report from the world's largest economy on Friday. Google parent
A portion of Japan's technology stocks edged up in morning trade, with AI-focused startup investor SoftBank Group rising 2.2 per cent and chip-testing equipment maker Advantest climbing 1.5 per cent.
Domestic corporate revenue announcements also helped pull the Nikkei higher as the earnings season revs up this week.
Speciality chemicals company Nitto Denko surged 4.3 per cent to land among the Nikkei's top percentage gainers, along with pharmaceutical firm Shionogi & Co, up 3.4 per cent.