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TOKYO, Sept 9 (Reuters) - Japan's Nikkei share average soared on Wednesday after Prime Minister Shinzo Abe's comments sparked hopes of more policy steps to support growth and as long-term investors hunted for bargain after the market hit a seven-month low.
The Nikkei jumped 5.6 percent to 18,390.26 in early afternoon trade after falling in the previous session below 17,450.77, the level the index ended at last year.
Abe, who just won a mandate to lead the ruling Liberal Democratic Party for another three years on Tuesday, told a meeting of investors that he would seek to lower corporate tax and sounded optimistic on reaching a trans-Pacific trade deal.
Market players said Abe's comments gave an added boost to Japanese stocks as they rebounded from overselling on Tuesday, helped by overnight gains on Wall Street.
"Abe's speech sparked speculation that he won't be sitting idly to let the economy flop. Investors thought there will be a rebooting of Abenomics," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Securities.
Abe's fiscal policy has yet to translate into gains in real wages for Japanese workers, and market participants said easing the corporate tax burden is a step toward giving companies more profits to put into employees' pockets.
"There is also a sense of relief at seeing Abe turn his attention back to the economy after putting so much of his focus toward a controversial security bill," said Nicholas Smith, a strategist at CLSA.
"The markets need him to keep an eye on the economy, and he's starting to do that because of the elections ahead."
Long-term investors also saw the Nikkei's dip to a seven-month low on Tuesday as a good opportunity for bargain-hunting as the Nikkei was trading around 14 times forecast earnings.
The country's public pension funds, which have been stepping up stock investment under Abe, are likely to be among them.
"Long-term investors such as public pension funds seem to be buying stocks today," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Securities.
If the gains hold, the Nikkei is on track to post the biggest daily gain since March 16, 2011.
Traders said that the Japanese market tends to be volatile as it is the most liquid market open during Asian trade. If the Chinese market falls, investors would trade on Japanese shares to hedge against the fall in China, they added.
All of the Topix's 33 subsectors were in positive territory.
Brokerage stocks jumped, with Nomura Holdings up 7.3 percent and Daiwa Securities Group rising 5.8 percent.
Exporters also gained ground. Toyota Motor Corp jumped 3.9 percent and Honda Motor Co gained 3.4 percent. The broader Topix gained 3.3 percent to 1,462.80. (Additional reporting by Ayai Tomisawa and Hideyuki Sano; Editing by Simon Cameron-Moore)