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Tokyo: Nikkei hits more than 1-month high on weak yen, sales tax hike delay

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[TOKYO] Japan's Nikkei share average rose to more than a one-month high on Monday as the dollar rose against the yen after US Federal Reserve Chair Janet Yellen hinted a near-term interest rate hike, while news that Japan's government is delaying a sales tax hike also supported sentiment.

The Nikkei rose 0.9 per cent to 16,985.62 in midmorning trade, the highest level since April 28.

The Fed chair said on Friday an interest rate increase in coming months "would be appropriate," if the economy and labour market continued to improve.

Bullish sentiment was also supported by Japanese Prime Minister Shinzo Abe's decision to delay a sales tax hike scheduled for next April by 2-1/2 years.

Masahiko Komura, vice-president of the ruling Liberal Democratic Party, told reporters on Monday of Abe's decision.

Traders said that although the market is relieved by the delay in the tax hike, investors will likely refrain from taking large positions before big events scheduled next month.

"The market is scared of 'negative surprises," said Michiro Naito, executive director at equity derivatives and quantitative strategies at JPMorgan. "There is the Fed, and there is still a small chance of 'Brexit'." A series of polls of British voters last week has pointed to the "remain" camp opening up a lead over those favouring Britain's withdrawal from the European Union.

Exporters got a boost after the dollar touched 111.030 yen, its strongest since April 28, and though it subsequently slipped back to 110.99 yen it was still up 0.6 per cent from Friday.

Honda Motor Co rose 0.9 per cent, Nissan Motor Co surged 3.0 per cent and Panasonic Corp gained 1.3 per cent.

Drugstore operator Ain Holdings jumped 14 per cent after posting a 27.7 per cent rise in its operating profit for the fiscal year ended April.

Bucking the strength, GungHo Online Entertainment tumbled more than 5.6 percent as investors cashed in profits on Friday's surge following an announcement of pre-orders for a Chinese edition of its hit game "Puzzles & Dragons".

The broader Topix rose 0.7 per cent to 1,359.73 and the JPX-Nikkei Index 400 gained 0.8 per cent to 12,270.77.