(Updates with stocks, details)
By Aiko Hayashi
TOKYO, May 27 (Reuters) - Japan's Nikkei stock average rose
0.8 percent on Tuesday, rebounding from a two-week closing low
hit the previous day, with stocks that had fallen sharply such as
Toyota Motor Corp <7203.T> and banks regaining ground.
Major paper firms surged, with Hokuetsu Paper Mills Ltd
<3865.T> jumping nearly 7 percent after Mitsubishi UFJ Securities
raised its rating on Hokuetsu and three other rivals to "2" from
"3", saying printing paper price hikes should drive up their
earnings.
"Stocks rose on a rebound after investors sold them off
somewhat too sharply yesterday, though the market lacks direction
as overseas markets were closed," said Masaru Hamasaki, senior
strategist at Toyota Asset Management.
Markets in the United States and Britain were closed on
Monday for holidays.
"Uncertainty in the U.S. economy continues to concern the
market, but investors seem to have started thinking U.S. housing
problems won't directly impact Japan and won't spread globally.
You can see that from relatively solid moves in the Japanese
market last week, while U.S. markets did poorly," Hamasaki said.
The benchmark Nikkei average <> added 112.43 points to
end the morning session at 13,802.62. It slid 2.3 percent on
Monday to book its lowest close in two weeks.
The broader Topix index <> gained 1 percent or 13.22
points to 1,357.40.
For the past week, U.S. stocks booked their worst week in
three months, dropping more than 3 percent, while Japan's Nikkei
shed 1.5 percent.
Zenshiro Mizuno, senior managing director at Marusan
Securities, said investors bought on the dips due to solid supply
and demand conditions but further gains will probably be limited
for a while.
"Worries about high oil prices, inflation and the economy
continue and the rebound in the market is likely to be limited,"
he said.
EXPORTERS, BANKS UP
Shares of Toyota added 1.2 percent to 5,070 yen, while Canon
Inc <7751.T> rose 1 percent to 5,320 yen and industrial robot
maker Fanuc Ltd <6954.T> gained 1.4 percent to 10,670 yen.
Hokuetsu Paper shot up 6.9 percent to 467 yen, while
Mitsubishi Paper Mills Ltd <3864.T> rose 5.6 percent to 245 yen,
Oji Paper Co Ltd <3861.T> gained 2.9 percent to 501 yen and
Nippon Paper Group Inc <3893.T> climbed 2.9 percent to 288,000
yen.
"Despite recent scandals involving inaccurate recycled paper
ratios, we think domestic paper majors will boldly raise printing
paper prices," Mitsubishi UFJ Securities analyst Hiroyuki Okaseri
wrote in a note dated Monday.
Bank shares, which had been also hit recently, gained, with
top lender Mitsubishi UFJ Financial Group <8306.T> climbing 1.6
percent to 992 yen. Japan's No.2 bank Mizuho Financial Group
<8411.T> added 2.3 percent to 525,000 yen and Sumitomo Mitsui
Financial Group <8316.T> rose 2 percent to 831,000 yen.
Toshiba Machine Co Ltd <6104.T> powered higher by 6.1 percent
to 771 yen after Mitsubishi UFJ Securities lifted its rating to
"1" from "2," saying a recovery is in sight for moulding machines
for auto makers, in addition to continued growth of large
machinery.
Trade was thin on the Tokyo exchange's first section, with
690 million shares changing hands, compared with last week's
morning average of 1.1 billion.
Advancing stocks outpaced declining ones by nearly 2 to 1.
