Japan's Nikkei reverses gains on BOJ's rate hike bets, stronger yen

TOKYO, Feb 5 (Reuters) - Japan's Nikkei share average reversed early gains to inch lower on Wednesday, as escalating bets on the Bank of Japan's interest rate hike and a stronger yen dampened sentiment.

The Nikkei .N225 had slipped 0.18% to 38,727.19 by the midday break after opening higher and rising as much as 0.8% tracking U.S. equities' overnight gains. .N

"Market fundamental was not weak but short-term investors sold Nikkei futures as the yen strengthened, which pushed the Nikkei index lower," Yusuke Sakai, a senior trader at T&D Asset Management, said.

The yen JPY=EBS rose 0.6% in the Asian session to its highest since mid-December 2024.

A stronger Japanese currency tends to hurt exporters' shares as it decreases the value of overseas profits in yen terms when firms repatriate them to Japan.

Japanese government bond (JGB) yields hit new multi-year highs after government data showed a rise in wages, a key gauge for the central bank's monetary policy.

"The wage data and a stronger yen changed the course of the Nikkei. Both are negative to local equities," said Shuutarou Yasuda, a market analyst at Tokai Tokyo Intelligence Laboratory.

In a sign of the market's firmness, of the more than 1,600 stocks trading on the Tokyo Stock Exchange's prime market, 59% rose, 36% fell and 3% traded flat.

The broader Topix .TOPX was unchanged at 2,737.99, supported by a 11% surge in Panasonic Holdings 6752.T.

Nissan Motor 7201.T erased most of its early gains and ended the midday session 1.55% higher, after a report said the automaker and rival Honda 7267.T might call off merger talks.

Department store operator Isetan Mitsukoshi Holdings 3099.T fell 7% to become the worst percentage loser on the Nikkei.