Tokyo stocks close higher after European markets rally

Tokyo stocks closed higher on Tuesday as rallies in major European markets prompted investors to buy back following two days of declines.

The benchmark Nikkei 225 index rose 0.80 per cent, or 184.18 points, to 23,274.13, while the broader Topix index gained 0.69 per cent, or 11.15 points, to close at 1,620.89.

Share prices opened higher on bargain-hunting following gains in major European bourses, and the buying sentiment was maintained during the day, brokers said.

US markets were closed for the Labor Day holiday.

Investors also welcomed a decline in new coronavirus infections in Japan and plans to launch a government campaign called "Go To Eat", which is meant to help virus-hit restaurants financially.

"Several sectors were supported by the positive news related to the coronavirus," Shinichi Yamamoto, a broker at Okasan Securities in Tokyo, told AFP.

Investors paid little attention to Tuesday's beginning of the race to decide Japan's next prime minister by way of the ruling Liberal Democratic Party's leadership election.

Three candidates officially registered their candidacy, with Shinzo Abe's right-hand man Yoshihide Suga widely expected to win.

"Suga's victory has already been factored in, and the focus is now shifting to the lineup of his cabinet," Yamamoto said.

The dollar fetched 106.24 yen in Asian afternoon trade, against 106.27 yen in London.

In Tokyo, advertising giant Dentsu, which is heavily involved in organising the Tokyo Olympics, jumped 2.98 per cent to 3,040 yen after the IOC's John Coates said the Games will go ahead regardless of the pandemic situation.

Toyota rose 0.70 per cent to 7,015 yen as it resumed operations at three plants in western Japan following a temporary suspension caused by Typhoon Haishen.

Japan's economy shrank 7.9 per cent in April-June from the previous quarter, more than the initial 7.8 per cent in preliminary data, the cabinet office said 10 minutes before the opening bell.