Japan's Nikkei rises on yen weakness; bank shares gain

TOKYO, Feb 7 (Reuters) - Japan’s Nikkei index edged up on Tuesday as sentiment was buoyed after the yen weakened, while banking shares led gains on expectations that the Bank of Japan (BOJ) may be on track to normalize its monetary policy.

The Nikkei share average was up 0.22% at 27,754.36 by the midday break, on course for a fifth straight session of gains. The broader Topix was up 0.45% to 1,988.04.

“The market is keeping its momentum as the yen’s gain against the dollar paused,” said Yugo Tsuboi, senior strategist at Daiwa Securities.

The dollar hovered near a one-month peak as traders raised their forecasts of U.S. Federal Reserve interest rate levels needed to tame inflation.

The yen weakened since the previous session after a report said Japan might pick a dovish policymaker as its next central bank governor.

The Japanese government is considering presenting to parliament its nominees for next BOJ governor and two deputy governors sometime next week.

Stronger growth in Japanese wages have driven expectations that the BOJ would alter its ultra-rate policy, said Tsuboi.

Government data showed Japanese real wages rose for the first time in nine months thanks to robust temporary bonuses, but uncertainty remains on whether pay hikes will continue to sustain Japan’s economic recovery.

“Japan’s wage was firmer than expected, and the BOJ is expected to normalize its monetary policy depending on who becomes the governor.”

Among individual shares and sectors, the banking sector rose 2.6% to be the top gainer among the 33 industry sub-indexes. Mitsubishi UFJ Financial Group Sumitomo Mitsui Financial Group rose 3.4% and 2.37%, respectively.

Heavyweight technology stocks also advanced, with Tokyo Electron and Advantest gaining 0.67% and 1.75%, providing the biggest boost to the Nikkei.

Bucking the trend, JFE Holdings tanked 8.12% to become the worst performer after Japan’s second-biggest steelmaker lowered its forecasts for crude steel output and full-year profit.

Kobe Steel lost 1.87%. (Reporting by Junko Fujita; editing by Uttaresh.V)