Nikkei rises over 1 percent, domestic-demand stocks shine

People, standing in front of an electronic board displaying share prices, wait to cross a street as cars pass by in Tokyo August 22, 2011.

TOKYO (Reuters) - The Nikkei average rose more than 1 percent on Tuesday, rebounding from a sharp drop the previous day, as appetite for domestic-demand shares such as food makers and paper firms offset concerns about the economies of key export markets and the impact of a strong yen.

Nintendo (7974.OS) surged more than 8 percent after the company indicated it would hold a trade show for its 3DS handheld device next month in Tokyo, triggering speculation that it would take steps to shore up sales of the device.

French technology website 01net helped spur buying with a report Nintendo was developing a joystick for the 3DS while working on a new version of the 3DS for release next year.

Analysts said the Tokyo market may continue attracting buying of defensive and domestic-demand stocks from both foreign and retail investors, while they could hesitate to purchase global cyclical shares such as exporters.

"Defensive buying may continue throughout this week," said Hikaru Sato, a senior technical analyst at Daiwa Securities Capital Markets.

Trading may be subdued, however, as investors await Federal Reserve Chairman Ben Bernanke's speech on August 26 at the central bank's annual gathering in Jackson Hole, Wyoming, for hints on any further U.S. easing.

Analysts also said that the chance of imminent monetary easing or intervention in the currency market had been reduced by political developments in Japan.

Unpopular Prime Minister Naoto Kan will likely resign on August 30, his economics minister said on Tuesday, but who will succeed him as Japan confronts a nuclear crisis and a long list of economic difficulties remains up in the air.

"Investors are assuming that it will be difficult for the government to take action unless the yen rises sharply or the stock market falls significantly, so the Nikkei may be stuck in a narrow range for the time being," Daiwa's Sato said.

The benchmark Nikkei .N225 climbed 1.2 percent to 8,733.01, while the broader Topix index .TOPX rose 1.0 percent to 750.39.

NINTENDO, TOSHIBA

Volume was high, with 2.1 billion shares changing hands on Tokyo Stock Exchange's main board, compared with last week's daily average of 1.7 billion shares.

Nintendo jumped 8.4 percent to 13,100 yen. Nintendo has also asked certain game developers to come up with new titles that would be specifically designed for a dual-controller game, the 01net report said, citing a source close to the company.

"There is no investment decision behind the rise. There's an element of short-covering," said a trader at a European brokerage, adding that news of the 3DS trade show in Tokyo on September 13 helped fuel the stock's rally.

"People are expecting that there will be some announcement."

Toshiba Corp (6502.T) rose 3.2 percent to 319 yen after the Nikkei business daily reported the firm would increase production of industrial motors to five times the current level by 2015 for the Chinese market.

Domestic-demand shares outperformed, with Oji Paper (3861.T) gaining 2.8 percent to 403 yen and Hokuetsu Kishu Paper (3865.T) adding 4.2 percent to 546 yen.

Beermaker Asahi Group Holdings (2502.T) climbed 3.4 percent to 1,624 yen, while food processing company Maruha Nichiro (1334.T) rose 1.5 percent to 134 yen.

Chubu Electric Power Co (9502.T) added 1.9 percent to 1,487 yen, after the Nikkei reported that the Japan Bank for International Cooperation would provide a 100 billion yen ($1.3 billion) low-interest loan to the utility as early as this week to finance purchases of liquefied natural gas.

($1 = 76.770 Japanese Yen)

(Additional reporting by Lisa Twaronite; Editing by Joseph Radford and Chris Gallagher)