Nikkei rises as trade jitters ease, banks weakened by low rates and bad debt

TOKYO (Reuters) - Japan’s Nikkei share average rose on Thursday morning as investor jitters over trade issues that hit markets early this week appeared to recede, while technology stocks rallied on the Nasdaq strong performance overnight.

The Nikkei index .N225 rose 0.8 percent to 22,734.28 at the midday break.

“The market has calmed down a little bit as most investors think that trade tension would not escalate further from there... U.S. and China would be both hurt if they keep going like that,” said Toru Ibayashi, executive director at wealth management at UBS Securities.

Market participants focused on the Topic’s recent underperformance against the Nikkei which they attributed to weakness in banks, which have large weighting on the Topix.

The broader Topix .TOPX lagged the Nikkei, rising only 0.3 percent, spiking the so-called NT ratio .NTIDX to 12.94, its highest level since 1999.

The banking sector .IBNKS.T, which dropped 1.3 percent and was the second worst sectoral performer on Thursday, has shed 15 percent since the beginning of the year as the Bank of Japan’s negative interest rate policy has undermined lending.

Moreover, the sector was hurt by a report in the Nikkei newspaper stating that mega banks’ cash advances to card holders at annual interest rates of 2-14 percent are piling up irrecoverable debt.

The Nikkei said that bad debt tied to such cash advances climbed 13 percent to a six-year high of roughly 140 billion yen ($1.27 billion) in fiscal 2017.

Sumitomo Mitsui Financial Group (8316.T) dropped 1.8 percent, Mitsubishi UFJ Financial Group (8316.T) fell 1.3 percent and Mizuho Financial Group (8411.T) shed 0.7 percent.

Tech shares gained ground. TDK Corp (6762.T) surged 2.2 percent and Sumco (3436.T) advanced 1.8 percent.

(This version of the story corrects spelling of the analyst’s name in paragraph 3, spelling of Topix in paragraphs 4 and 5 and spelling of Sumco in paragraph 10.)