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TOKYO, May 29 (Reuters) – Japan’s Nikkei share average rose to its highest level since July 1990 on Monday, buoyed by optimism over a U.S. debt ceiling deal and a weaker yen.

Shares of Japanese chip companies continued to outperform after AI euphoria lifted Wall Street peers.

The Nikkei (.N225) jumped as high as 31,560.43 in the first 10 minutes of trading, though gains moderated during the session to hold the index up 1.7% at 31,427.38.

US President Joe Biden announced on Sunday that he has finalized a budget deal with House Speaker Kevin McCarthy and the deal is ready to go to Congress for a vote. However, the deal has drawn criticism from hard-line Republicans and progressive Democrats

“The deal is not done, so the level of risk is still there, but the main agreement saw that the risks are reduced and both parties committed to avoid a technical default,” said Maki Sawada, a strategist at Nomura Securities.

“The Nikkei crossed the psychological 31,500 level today, but in the end that level was a bit too heavy,” he said. “This week, I expect the Nikkei to make steady progress, but with short-term revisions to test its momentum.”

The broader Topix (.TOPX) rose to 2,175.13, but failed to approach last week’s 33-year high of 2,188.66. Last time it increased by 1.1% to 2169.66.

The Nikkei’s heavier weighting in export stocks saw it make bigger gains after the yen fell to a peak of $141 for the first time in six months. A weaker currency raises the cost of foreign earnings.

Honda Motor ( 7267.T ) rose 2.5% and Nissan ( 7201.T ) rose 1.5%.

The top Nikkei performer was Advantest ( 6857.T ), a maker of chip test equipment that counts Nvidia Corp ( NVDA.O ) among its customers. Advantest shares rose as much as 6.9% to a record high and are set to extend a three-day rally if gains hold.

Of the Nikkei’s 225 components, 191 advanced, 31 declined and three were flat.

Reporting by Kevin Buckland; Editing by Himani Sarkar, Muralikumar Anantharaman and Sherry Jacob-Phillips

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