Japan's Topix hits record high in trade deal afterglow

By Kevin Buckland

TOKYO, July 24 (Reuters) - Japan's Topix index rose to a record high on Thursday and the Nikkei share average hit a new one-year peak, as stocks rallied for a second straight session after Tokyo struck a long-awaited trade deal with Washington.

The Topix .TOPX advanced as much as 1.4% to reach 2,968.48 for the first time ever.

The Nikkei .N225 gained as much as 1.4% to 41,740.71, its highest level since July of last year.

Banks led the gains, with the Topix banking index .IBNKS.T jumping 3.6%, buoyed by bets that the additional economic clarity offered by the tariff deal will allow the Bank of Japan to resume interest rate hikes later this year.

The central bank will meet on policy on Wednesday and Thursday of next week, but traders are eyeing a gathering in October for a potential rate hike, putting the odds at about a coin toss.

The trade agreement announced late on Tuesday by U.S. President Donald Trump reduced a baseline tariff rate and autos-specific levies to 15%, from the 25% duties Washington had threatened previously.

The Topix transport equipment index .ITEQP.T gained 0.8%, adding to the previous session's nearly 11% surge.

On Wednesday, the Topix gained 3.2% and the Nikkei climbed 3.5%.