Japan's Nikkei up on Wall Street gains, despite firm yen

By Brigid Riley

TOKYO, Feb 6 (Reuters) - Japan's Nikkei share average gained on Thursday as Wall Street's rise boosted sentiments, even as a firmer yen on the back of strengthening bets for an interest rate hike by the Bank of Japan (BOJ) weighed.

The Nikkei .N225 rose nearly 1% in early trade before narrowing gains, up 0.2% to 38,888.04 by the midday break. The broader Topix .TOPX also added 0.2% to 2,751.18.

All three major U.S. stock indexes ended Wednesday higher, rebounding from declines earlier in the session as investors brushed off disappointing Alphabet GOOGL.O earnings and weighed the prospect of future rate cuts from the Federal Reserve. .N

A strong performance by U.S. tech shares and gains by AI darling Nvidia NVDA.O trickled through to boost Japan's heavyweight chip-related stocks. Advantest 6857.T, which counts Nvidia among its customers, added 1.1%, while Tokyo Electron 8035.T advanced 1.3%.

The yen's strength, however, dented overall gains, with the Japanese currency climbing as high as 151.81 against the U.S. dollar as one of BOJ's most hawkish policymakers, Naoki Tamura, said the central bank must raise rates to at least 1% by the second half of fiscal 2025.

A stronger domestic currency hurts exporter shares and investor sentiment as it decreases the value of overseas profits when firms repatriate them to Japan.

Other than the impact from higher U.S. stocks and a stronger yen, it was "hard to see any other trends," likely keeping the Nikkei in its recent range in a "directionless" day of trade, said Kazuo Kamitani, an equities strategist at Nomura Securities.

The domestic earnings season, however, continued to produce big moves among individual shares.

Renesas Electronics 6723.T surged 12.2% to be the top percentage gainer on the Nikkei after the chipmaker announced its revenue report and Nomura Holdings 8604.T, Japan's biggest brokerage, gained 6.2%.

Honda 7267.T slid 4.1%, while Nissan Motor 7201.T added 2.1% amid continued news that Nissan may step back from merger talks.