TOKYO, July 4 (Reuters) - Japan's Nikkei share average edged up in early trade on Wednesday, supported by keen interest in domestically driven stocks and improved sentiment amid expectations central banks will act to support flagging global growth. The Nikkei rose 0.5 percent to 9,113.09, helped by gains for cyclical stocks such as industrial machinery and mining companies, while safer bets such as pharmaceuticals underperformed.
"The market has become a lot more risk-on and is becoming more resilient to developments overseas because the gains are led by companies relying on domestic demand," said Ryota Sakagami, chief strategist of SMBC Nikko Securities. Construction machinery maker Komatsu Ltd advanced 1.9 percent, while industrial robotics maker Fanuc Ltd gained 1.2 percent on hopes of increased demand as Japan's post-tsunami reconstruction gathers pace over the summer. The mining sector was the best-performing subsector on the Topix index, gaining 3.1 percent while the defensive foods sector dropped 0.8 percent. Despite reporting June U.S. sales that were nearly double the previous year's, Honda Motor Co Ltd underperformed with a 0.3 percent gain, partly because domestic production was affected last year by Japan's massive tsunami.
Exporters have also been out of favour recently as a stream of disappointingly soft data from the United States and China has worried investors, although it has also prompted hopes for further stimulus from central banks to jumpstart flagging global growth.
The European Central Bank is expected to drop its main refinancing rate by 25 basis points to a historic low of 0.75 percent at a meeting on Thursday, while some investors are hoping the Bank of Japan will expand its easing programme at a policy meeting concluding July 12. The Nikkei's gains built on Tuesday's 0.7 percent advance, and brought it closer to 9,250, a level that marks a 50 percent retracement of its slide from a one-year high hit on March 27 to a six-month low struck on June 4. Some investors are concerned that the market is becoming overheated, as its 14-day relative strength index hit 65.1 and approaches "overbought" territory at 70. "The rebound has certainly been very rapid and strong, and so if U.S. unemployment figures, the ECB decision or Chinese GDP data disappoints then another sell-off is possible," Sakagami said. The broader Topix index rose 0.3 percent to 779.83.
