Japan's Nikkei gains nearly 2% as chip-related shares rally

TOKYO, Jan 7 (Reuters) - Japan's Nikkei share average climbed on Tuesday by nearly 2%, snapping a two-session losing streak, as chip-related stocks tracked their U.S. peers higher.

The Nikkei .N225 rose 1.97% to close at 40,083.3.

Shares of chip-making equipment maker Tokyo Electron 8035.T surged 11.25% to be the biggest boost to the Nikkei index. Chip-testing equipment maker Advantest 6857.T rose 4.72%.

"It looks like the market is betting on potential for large stocks, which are preferred by foreign investors," said Kentaro Hayashi, a senior strategist at Daiwa Securities.

Overnight, the S&P 500 and the Nasdaq Composite rose to their highest in more than one week, boosted by a rally in semiconductor stocks and a report that suggested the incoming Trump administration could adopt a less-aggressive tariff stance than expected. .N

The broader Topix .TOPX rose 1.1% to 2,786.57. The Topix Core 30 .TOPXC, comprising the top 30 firms, climbed 1.75%, while the Topix Small .TOPXS, which consists of stocks excluding the top 500, inched nearly 0.1% higher.

Among other stocks, chipmaker Renesas Electronics 6723.T rose 7% and chip-making device supplier Disco 6146.T climbed 7.5%.

Banks gained as Japanese government bond yields rose, with Mitsubishi UFJ Financial Group 8306.T and Sumitomo Mitsui Financial Group 8316.T up 3.28% and 2.25%, respectively.

Entertainment firm Konami Group 9766.T fell 1.47% to weigh on the Nikkei the most.

Nippon Steel 5401.T slipped 1.52%. The steelmaker's chief executive said on Tuesday that the firm would never give up on expanding in the United States.

U.S. President Joe Biden unlawfully blocked Nippon Steel's $14.9 billion bid for U.S. Steel through a sham national security review, the companies alleged in a lawsuit filed on Monday.

Of more than 1,600 shares traded on the Tokyo Stock Exchange's prime market, 49% rose and 46% declined, with 4% trading flat.

(Reporting by Junko Fujita; Editing by Subhranshu Sahu and Sherry Jacob-Phillips)