Japan's Nikkei rebounds as concerns over BOJ's ETF sales ease

By Junko Fujita

TOKYO, Sept 22 (Reuters) - Japan's Nikkei rose more than 1% on Monday, rebounding after a volatile last session, as concerns eased over the impact of the Bank of Japan's decision to sell its holdings of riskier assets.

The Nikkei share average .N225 climbed 1.52% to 45,729.33 by the midday break, while the broader Topix .TOPX rose 0.9% to 3,175.89.

The BOJ said on Friday that it would sell its holdings of exchange-traded funds (ETFs) at an annual pace of around 330 billion yen ($2.23 billion), another move to phase out its massive monetary stimulus.

The Nikkei reversed its gains after the BOJ's announcement on Friday to fall as much as 2%. It ended the session 0.57% lower.

"Investors overreacted to the BOJ's announcement. And today, the market is rebounding," said Seiichi Suzuki, chief equity market analyst at Tokai Tokyo Intelligence Laboratory.

The pace of BOJ sale of ETFs is slow, and the market just wondered why it turned so bearish on Friday, he said.

Japanese equities were also underpinned by Wall Street's strength and optimism about new domestic policies, said Hiroyuki Ueno, chief strategist at Sumitomo Mitsui Asset Management.

As the race for the Liberal Democratic Party leadership has started, the market is optimistic about economic measures to be undertaken by whoever becomes the new leader, said Ueno.

The next LDP leader is likely to become the country's new prime minister as the party is by far the largest in the lower house of parliament.

The party lost its majorities in both houses under former prime minister Shigeru Ishiba, so the path is not guaranteed.

On Monday, chip-related shares rose to provide the biggest boost to the Nikkei, with Advantest 6857.T and Tokyo Electron 8035.T up 3.76% and 5.88%, respectively.

Drug makers Chugai Pharmaceutical 4519.T and Daiichi Sankyo 4568.T lost 1% and 1.86%, respectively, and were the biggest drags for the Nikkei.

($1 = 148.2100 yen)