Japan's Topix hits record high on easing US tariff worries, domestic firms' outlook

TOKYO, Aug 7 (Reuters) - Japan's Topix index closed at a record high on Thursday after worries about the impact of U.S. tariffs eased, and increased investor optimism about strong performance of domestic firms.

The broader Topix .TOPX rose 0.72% to 2,987.92. The Nikkei .N225 climbed 0.65% to 41,059.15.

Both indexes rose for a third consecutive session.

The three-day rally eclipsed a sharp decline on Monday, when the Nikkei posted its largest drop in two months.

"The market was too bearish, with concerns about the U.S. tariff impact on domestic firms. But that sentiment was reversed," said Seiichi Suzuki, chief equity market analyst at Tokai Tokyo Intelligence Laboratory.

"And the weak economic data in the U.S. raised expectations for the Federal Reserve's rate cut, which supported sentiment of both U.S. and Japanese equities," said Suzuki.

Sony Group 6758.T jumped 4% to provide the biggest boost to the Topix, after the game and camera maker raised its full-year operating profit forecast by 4%.

The Topix index held its momentum even as heavyweight Toyota Motor 7203.T slipped 1.5% after the automaker cut its full-year operating profit forecast by 16%.

Shares of Mitsubishi UFJ Financial Group 8306.T rose 1.85% and Sumitomo Mitsui Financial Group 8316.T gained 1.35%.

M3's shares surged 22% after Goldman Sachs raised the target price for the medical services platform operator to 2,300 yen from 2,250 yen.

Cosmetic maker Shiseido 4911.T jumped 11%.

Chip-making equipment maker Tokyo Electron 8035.T fell for a third day, falling 2.46% on Thursday to weigh on the Nikkei the most.

Chip-testing equipment maker Advantest 6857.T reversed early losses to end 0.3% higher.