TOKYO Japan's Nikkei share average rose 1.1 percent on Tuesday, extending the previous session's technical rebound as investors picked up cheaper stocks after last week's sharp sell-off, triggered by concern over a deepening euro zone debt crisis.
The Nikkei .N225 closed up 95.40 points at 8,729.29, holding just below its five-day moving average of 8,730.45, as exporters gained a foothold on the steadying yen and investors picked up stocks that were heavily sold off last week.
"Things are no better in Europe or China, but the current situation has been priced in, and now it's just short-covering," said Fumiyuki Nakanishi, general manager of investment and research at SMBC Friend Securities.
Construction machinery firm Komatsu Ltd (6301.T) surged 5.3 percent after Nomura said its president assured analysts on Monday that demand for the company's new mining equipment was steady, with no orders cancelled.
The stocks rebounded after losing 6.8 percent in the previous two sessions, edging ahead of peers Hitachi Construction Machinery Co Ltd (6305.T), which advanced 2.6 percent, and Kubota Corp (6326.T), which gained 4.1 percent.
The broader Topix .TOPX gained 1.1 percent to 733.33.
Nearly 1.52 billion shares changed hands on the main board, up slightly from Monday's 1.51 billion share but down from last week's average of 1.97 billion, signaling a relative low conviction among investors of the rebound.
"Volume is very, very light. Basically everybody is sitting on the sidelines. Obviously, you've got the continuing uncertainty of what's going on in Europe and the Bank of Japan meeting tomorrow. It's easier to sit on cash," a trader at a foreign brokerage said.
The Topix carried a 12-month forward price-to-earnings ratio of 11.1, a level not seen since October and way below a 10-year of 17, data from Thomson Reuters Datastream showed.
Renesas Electronics Corp (6723.T) surged 7.4 percent, recovering some of the previous session's 10.3 percent fall, after the Yomiuri newspaper said the loss-making chipmaker would cut about 15 percent of its workforce and raise 50 billion yen in capital.
Renesas, which was formed from the chip divisions of Mitsubishi Electric Corp (6503.T), Hitachi Ltd (6501.T) and NEC Corp (6701.T), is the world's biggest supplier of microcontroller chips used in automobiles, but has struggled in the face of global oversupply and new competitors.
Hitachi, Mitsubishi Electric and NEC were up between 1.3 and 2.4 percent.
Short interest in NEC has risen fourfold in the last month, to 7.7 percent of its shares on loan, research firm Data Explorers said, after announcing an annual net loss of 110.3 billion yen in late April.
Other battered exporters also enjoyed a bounce, with Toyota Motor Corp (7203.T) up 2.5 percent, Panasonic Corp (6752.T) adding 1.7 percent and industrial robot maker Fanuc Corp (6954.T) gaining 3.7 percent.
The Bank of Japan will conclude a two-day meeting on Wednesday, although market consensus is that it would not expand its asset purchase programme further.
"On the surface, it doesn't seem necessary for the BOJ to ease right now, as Japanese GDP grew 1 percent in the first quarter," said Fujio Ando, senior managing director at Chibagin Asset Management.
"But when you see how much they've already spent since the last meeting, the spending seems like a good idea."
(Additional reporting by Sophie Knight, Editing by Jonathan Thatcher)