Japan’s Nikkei holds ground despite surprise economic contraction

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TOKYO — Japan’s Nikkei index edged higher on Tuesday, as traders scooped up beaten-down stocks, even as data showed a surprise contraction in the domestic economy.

The Nikkei share average rose 0.11% to 27,994.68 by the midday break, while the broader Topix gained 0.33% to 1,963.44.

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“Appetite for Japanese stocks is getting stronger as investors see them as a bargain,” said Chihiro Ohta, assistant general manager at the investment research and investor services at SMBC Nikko Securities.

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“We can shrug off the (Japan economic) data because that was in the past. Japan’s economy stands in a favorable position compared with that in the United States and Europe.”

The Japanese economy unexpectedly shrank for the first time in a year in the third quarter, as global recession risks, a weak yen and sharply higher import costs took a toll on household consumption and business activity.

Recruit Holdings fell 8.24% to become the biggest loser on the Nikkei after the staffing agency reported first-half earnings that disappointed investors. Advertising giant Dentsu Group lost 6.5%.

Of the Nikkei components, 151 stocks advanced, against 70 that fell.

The banking sector rose 2.32% and was the top gainer among the Tokyo Stock Exchange’s 33 industry sub-indexes.

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Sumitomo Mitsui Financial Group jumped 4.4% and Mizuho Financial Group rose 1.38% after the banks reported strong second-quarter profits on demand from overseas clients looking to lock in loans ahead of higher interest rates.

Shionogi climbed 2.64% after a report said the Japanese government would re-evaluate its COVID-19 drug later this month for emergency approval.

Technology investor SoftBank Group rose 2.18% after posting its biggest daily loss in more than two-and-a-half years in the previous session.

“Given that both growth and value shares were gaining, market fundamentals are firm,” said Yugo Tsuboi, a senior strategist at Daiwa Securities. (Reporting by Junko Fujita; Editing by Subhranshu Sahu)