TOKYO, Oct 2 (Reuters) - Japanese shares rose on Monday, as concerns over sell-off by pension funds toward the end of the quarter were removed, while appetite was boosted as the U.S. government avoided a federal shutdown.
The Nikkei index rose 1.41% to 32,305.66 by the midday break, while the broader Topix was up 1.15% to 2,350.21.
"There were concerns among investors until last week that pension funds might sell shares to rebalance their portfolios. Those worries were gone as the new quarter started on Monday," said Takehiko Masuzawa, trading head at Phillip Securities Japan. "Also investors bought back stocks as they were relieved after the U.S. government avoided the shutdown."
The U.S. Congress late on Saturday passed a stopgap funding bill with overwhelming Democratic support in a bid to avoid the federal government's fourth partial shutdown in a decade.
The banking index jumped 2.65% to become the top performer among the 33 industry sub-indexes on the Tokyo Stock Exchange, as yields on Japanese government bonds (JGB) rose.
The JGB yields across the curve rose on Monday, with the 10-year bond yields hitting a fresh high since September 2013.
The automaker index rose 2.03% as yen fell against the dollar.
The yen slid to a roughly 11-month low earlier in the day as the Japanese currency continued its slow-but-steady decline toward the 150 mark, a level which some see as a to spur Japanese authorities to intervene in the market.
Uniqlo brand-owner Fast Retailing rose 1.72% to become the biggest boost for the Nikkei. Chip-testing equipment maker Advantest jumped 4.16% and robot maker Fanuc climbed 3.29%.
Online shopping platform Rakuten Group lost 2.35% to become the worst performer on the Nikkei.
(Reporting by Junko Fujita; Editing by Rashmi Aich)