By Kevin Buckland
TOKYO, Aug 22 (Reuters) - Japan's Nikkei share average rose for a second day on Tuesday, with banks climbing amid a surge in bond yields and chip-related shares tracking gains in Wall Street peers.
The Nikkei .N225 gained 0.67% to 31,776.06 by the midday recess, having risen much as 1.1% earlier in the session.
Of the Nikkei's 225 components, 151 rose, 73 fell, and one was flat.
Tuesday's gains put the Nikkei on track to extend a 0.37% rise in the previous session, after the benchmark index fell 3.2% to hit a 2 1/2-month low last week.
The broader Topix .TOPX, meanwhile, added 0.73%.
Among the Tokyo Stock Exchange's 33 industry groups, banking .IBNKS.T was the best performer by far, gaining 2.68% as higher long-term yields JP10YTN=JBTC boosted the outlook for profit from lending.
Resona Holdings 8308.T, Mitsubishi UFJ Financial Group 8306.T and Sumitomo Mitsui Financial Group 8316.T advanced about 3.1% each.
The Nikkei's top performer was chip-testing equipment maker and Nvidia supplier Advantest 6857.T, which rallied 3.76%. That also made it the biggest points gainer, contributing 47 points to the index.
Shares of Nvidia NVDA.O soared 8.5% overnight ahead of the chip designer's earnings announcement on Wednesday.
"Investors bought back (Japanese) chip shares after U.S. chip shares rose overnight," said Shigetoshi Kamada, general manager at the research department at Tachibana Securities.
"They had been short selling those shares amid caution ahead of Nvidia's earnings."
SoftBank Group 9984.T was another notable winner, rising 2.59%, as the startup investor heads toward an initial public offering for its chip designer Arm Holdings.
At the other end, companies with heavy exposure to China underperformed, with the country's economy stuttering and an underwhelming stimulus in the major trading partner.
Cosmetics company Kao 4452.T sank 0.88% and appliance maker Daikin 4452.T slipped 0.62%.
Uniqlo store operator Fast Retailing 9983.T also stood out for flipping from an early advance of as much as 0.79% to be down as much as 0.64% during the session. It ended the morning with a 0.15% decline.
(Reporting by Kevin Buckland; Additional reporting by Junko Fujita; Editing by Varun H K)
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