TOKYO, Oct 2 - Japanese shares held firm by mid-afternoon on Thursday as improved corporate sentiment in the Bank of Japan's "tankan" survey encouraged investors to chase after domestic-oriented shares such as banks and insurers. But the rises were capped as some shares came under pressure from profit-taking, and many investors shied away from stocks vulnerable to the yen's continued strength, such as exporters. As of 0440 GMT, the Nikkei average <.N225> was up 1.61 percent at 10,528.18 after rising as high as 10,576.26, its best intraday level since September 24. The broader, capital-weighted TOPIX index <.TOPX> was up 2.17 percent at 1,052.31.
"In order for the market to go up further, we need export-related shares to advance," said Hiroaki Kuramochi, head of global equities at Credit Lyonnais. "Big-name companies like Toyota are after all the leaders of the market." Toyota Motor Corp <7203.T>, Japan's biggest auto maker, was unchanged at 3,340 yen, giving up earlier gains. Sharp Corp <6753.T>, Japan's biggest liquid crystal display maker, was down 0.18 percent at 1,628 ahead of an announcement on its first-half earnings outlook. But bank shares continued to drive up the market after the tankan showed the headline figure for large manufacturers rose to plus 1, the highest in nearly three years, from minus 5 in June. Mizuho Financial Group <8411.T>, the world's biggest bank by assets, was the most actively traded issue and gained 8.97 percent to 316,000 yen, after rising as far as 320,000 and setting a new record high for a third straight session. Sumitomo Mitsui Financial Group <8316.T> extended gains in the afternoon after the company said it expected around 40.3 billion yen ($364 million) in tax refunds from the Tokyo city government after a group of banks approved an out-of-court settlement reached by lawyers last month. The stock jumped 7.6 percent to 538,000 yen. The bullish momentum among top banks spread to regional banks and other financial stocks such as non-life insurer Millea Holdings <8766.T>, with some traders saying these were laggards in comparison to the big banks' recent meteoric rise. Millea was up by its daily limit, rising 16.13 percent to a lifetime high of 1.44 million.
The market's solid performance benefitted brokerage firms such as Nikko Cordial Corp <8603.T> on expectations that swelling turnover would lead to more business for their broking operations. Nikko rose 8.66 percent to 640 yen and its rival Nomura Holdings <8604.T> was up 3.85 percent at 1,889. Investors also shopped around for other shares relatively shielded from the fallout from the yen's strength, such as real estate and retail stocks. Japan's top real estate developer, Mitsui Fudosan Co Ltd <8801.T>, was up 9.01 percent at 1,113 yen, adding to the previous day's 3.13 percent rise. ($1=110.67 yen)//