Japan's Nikkei share gauge rallies as bond market jitters subside

TOKYO, Aug 20 (Reuters) - Japan's Nikkei share average rallied on Thursday after U.S. measures to steady its bond market helped restore investor sentiment and demand for riskier assets.

The benchmark Nikkei 225 .N225 advanced 1% to 65,982.49 as of the midday break. The broader Topix .TOPX rose 0.91% to 4,048.72.

Long-term borrowing costs from the U.S. to Germany and Japan hit their highest in decades earlier this week, reflecting concerns about ballooning government debt and inflation. The U.S. Treasury announced overnight it will double buyback sizes for long-duration debt, prompting a sharp decline in U.S. yields that also spread to Japan.

"The fall in interest rates is undoubtedly the key factor driving the market today," said Wataru Akiyama, an equities strategist at Nomura Securities. "It is notable that shares and sectors which had previously lagged behind the rise in AI and semiconductor-related stocks are now showing significant gains."

Breadth was overwhelmingly positive, with 175 advancers on the Nikkei 225 against 48 decliners and 2 unchanged.

The largest percentage gainers in the index were Sumitomo Metal Mining 5713.T, up 9.72%, followed by Sumitomo Pharma 4506.T, 8.70% higher, and Kansai Electric Power 9503.T, which gained 8.09%, set for its biggest one-day gain since August 2024.

The biggest losers were Rohm 6963.T, down 3.88%, followed by Ibiden 4062.T and Sumco 3436.T, dropping 3.40% and 3.18%, respectively.