(Bloomberg) -- Japanese shares rose, reversing earlier losses, as the yen weakened after Bank of Japan Deputy Governor Shinichi Uchida said the central bank will not raise rates when the market is unstable.
The Nikkei 225 Stock Average closed 1.2% higher at 35,089.62, while the Topix climbed 2.3% to 2,489.21, reversing earlier declines in volatile trading.
“Uchida’s comments were quite positive in that they show consideration for the market,” said Jumpei Tanaka, a strategist at Pictet Asset Management Japan Ltd. in Tokyo. “Like other major central banks, the BOJ is becoming aware of the importance of dialog with the market.”
The BOJ’s apparent bid to stem panic helped Japanese shares extend their rebound for the second day. The Topix briefly recovered all of Monday’s 12.2% loss and filled a major gap on a technical chart.
Lenders led gains as the Topix bank index jumped 7.9%, while trading houses climbed as the Topix wholesale index gained 4.7%.
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The rebound also spurred speculation pension funds picked up shares. Japan’s Government Pension Investment Fund, which had ¥254.7 trillion ($1.74 trillion) in assets as of June, puts about 25% of its portfolio in domestic stocks.
“The Topix turning positive may indicate that pension funds are coming in,” said Yusuke Sakai, senior trader at T&D Asset Management. “They need to buy stocks at these levels.”
Overseas long-only investors may be buying now that shares are trading at bargain prices, he added. The Topix traded at 13 times expected earnings as of the previous close, versus at least 15.5 times just less than a month ago.
Trading was volatile but also highly active with the value of trading in the Tokyo Stock Exchange’s Prime market reaching 7 trillion yen for three days in a row.
--With assistance from Toshiro Hasegawa.
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