The Nikkei average rose 1.42 percent on Tuesday to end above 15,000 for the first time in more than a week as Tokyo Electron Ltd. and Toshiba Corp. climbed after strong quarterly results from U.S. chip firms boosted expectations of higher earnings at home.
Shares of Nintendo Co. Ltd. jumped as strong demand for its DS handheld players allowed it to raise its outlook, while Olympus Corp. rose on a ratings upgrade by JP Morgan.
Strong earnings from Texas Instruments Inc., the biggest maker of chips for cellphones, helped fuel expectations for those at Japanese tech firms, said Hideyuki Suzuki, investment information manager at SBI Securities.
Many Japanese firms are also involved in making components for high-end cell phones, so Texas Instruments' progress in increasing its market share ... can be seen as a positive for companies that occupy a similar position here, he said.
Still, Yutaka Shiraki, a senior strategist at Mitsubishi UFJ Securities Co. Ltd., said that with higher oil prices and a possible slowdown of the U.S. economy, investors are too cautious to buy shares aggressively.
It's just that stocks are rebounding after being sold too much. Concern about future corporate earnings growth is increasing, and the upside is limited, he said.
The Nikkei rose 210.74 points to 15,005.24, marking its first close above 15,000 since July 13. The broader TOPIX index gained 1.36 percent to 1,534.82.
Despite Tuesday's advance, some market participants see a dim outlook.
Uncertainty about monetary policy in both the United States and Japan, coupled with concerns about global security, meant the Nikkei is unlikely to return soon to the 5-1/2-year highs hit earlier this year, said Kirby Daley, a strategist at Fimat.
The whole landscape is different, Daley said, referring to the changes in investor sentiment since April, when the Nikkei touched 17,500.
I think it's very possible that we're going to see a range between 14,000 and 15,500 for the rest of the year, he said.
With the outlook for the global equity market looking less robust, Daley said he favored shares of firms geared toward Japan's economic recovery, specifically banks.
Tomomi Yamashita, senior fund manager at Shinkin Asset Management Co. Ltd., said the market's tone is bearish due to concern about global economic slowdown.
It's better to look at macro-economic factors than individual companies when trading stocks, he said. Corporate earnings and revisions follow the macro trend. Besides, there is this fear that stock prices might fall on the day after you buy.
CHIP STOCKS GAIN
Chip-gear maker Tokyo Electron rose 3.2 percent to 7,350 yen, recouping some of its 3.8 percent drop from the previous session. Advantest Corp. added 2.1 percent to 11,160 yen after falling 1.4 percent on Monday.
Nintendo surged 4 percent to 21,680 yen after the game software and hardware maker said on Monday that its quarterly profit shot up nearly eightfold on strong demand for its DS handheld players and raised its full-year outlook.
Olympus jumped 4.9 percent to 3,200 yen after JP Morgan raised its rating to overweight from neutral, citing strong endoscope sales and a softer yen.
Another notable stock was Toshiba, the world's top maker of NAND-type flash memory, gaining 3.9 percent to 725 yen following better-than-expected earnings from its U.S. rival SanDisk Corp., which underscored continuing strong demand for flash memory. The stock is now at a two-week high but is off 11 percent from this year's high of 815 yen marked in January.
After the market closed, Sharp Corp. posted a 14 percent gain in quarterly profit, aided by robust demand for its liquid crystal display TVs, and it stood by its annual outlook that matched market expectations.
Shares of Sharp ended up 3.1 percent at 1,892 yen.
Meanwhile, Japan's No. 2 car maker Nissan Motor Co. posted a 26 percent drop in quarterly operating profit as an empty product pipeline caused a global sales slump.
Prior to the announcement, Nissan ended up 2.4 percent at 1,180 yen.
Trade was slow, with 1.43 billion shares changing hands on the Tokyo exchange's first section, compared with last week's daily average of 1.73 billion shares. Advancing shares beat decliners by a ratio of more than three to one.
(Additional reporting by David Dolan)