TOKYO, Sept 9 (Reuters) - Japan's Nikkei share average scored its biggest single-day gain in nearly seven years on Wednesday, after Prime Minister Shinzo Abe's comments sparked hopes of more policy steps to support the economy and long-term investors emerged to pick up bargains.
The Nikkei jumped 7.7 percent to close at 18,770.51 for its biggest single-day gain since October 30, 2008, led by gains in drugmakers and financial shares.
Abe, who just won a mandate to lead the ruling Liberal Democratic Party for another three years on Tuesday, gave a statement indicating 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. A steadily weakening yen also helped boost Japanese shares.
"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.
The prime minister'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.
"The bottom line is Japan needs Abe's third arrow to fly," said Gavin Parry, managing director at Parry International Trading in Hong Kong.
"Japan Inc has been making tremendous profits thanks to the weak yen, but they have yet to put those profits towards increasing capital expenditures or real wages for workers. Corporate tax breaks are one way of encouraging companies to do those things now that it's clear Abe's corporate governance reforms failed to shame them into action."
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.
All of the Topix's 33 sub-sectors were in positive territory. Its pharmaceutical sub-index, which shed 5.2 percent on Tuesday, bounced back to gain 8.8 percent as bargain hunters scooped up oversold shares in industry giants such as Takeda, which climbed 7.7 percent.
Brokerage stocks jumped, with Nomura Holdings up 8.7 percent and Daiwa Securities Group rising 6.9 percent.
Exporters also gained. Toyota Motor Corp jumped 6.3 percent and Honda Motor Co leapt 6.6 percent.
The broader Topix gained 6.4 percent to 1,507,37, with turnover hitting 3.14 trillion yen, more than 15 percent above the average in the past 100 days. (Additional reporting by Ayai Tomisawa and Hideyuki Sano; Editing by Jacqueline Wong)