TOKYO, Oct 3 (Reuters) - Japanese stocks rose on Monday as global risk asset markets took heart from easing concerns over Deutsche Bank, triggering a relief bounce in financial sector shares.
The Nikkei rose 1.2 percent to 16,640.70 after losing 1.5 percent on Friday.
Tokyo shares received an early lift from Friday's gains on Wall Street.
The S&P financial sector saw its best performance in roughly two months on Friday, with Deutsche Bank shares surging on a report that the German lender was close to a more favourable settlement with U.S. authorities over the sale of toxic mortgage bonds.
"The latest developments regarding Europe's banking sector has helped lift the market. But while an element of uncertainty has been removed, it has not provided fresh direction," said Soichiro Monji, chief strategist at Daiwa SB Investments.
"There's a bit of fatigue in the market towards central bank monetary policy and it will likely look to economic indicators for incentives this week."
The Nikkei showed little reaction to the Bank of Japan's tankan survey, which revealed that confidence among big Japanese manufacturers was flat in the three months to September and service-sector sentiment worsened to its lowest in nearly two years.
Tokyo's bank index was up 1.6 percent after sliding 2.3 percent on Friday when jitters over Deutsche Bank weighed on the sector.
Mitsubishi UFJ Financial Group rose 1.1 percent, Sumitomo Mitsui Financial Group gained 0.9 percent and Mizuho Financial Group added 1.1 percent.
Kawasaki Heavy Industries Ltd fell 10.9 percent after the company revised its operating profit forecast for the year through March 2017 to 34 billion yen ($335.37 million) from 70 billion yen, citing a stronger yen and a decline in profitability from its shipbuilding business.
Kawasaki Heavy said it may pull out of shipbuilding and aims to reach a decision by the end of March.
Coca-Cola West climbed 6.2 percent after the company proposed on Friday a formal integration date with Coca-Cola East Japan.
Coca-Cola Bottlers Japan Inc is expected to be established on April 1, 2017 as a result of the integration.
The broader Topix gained 1.1 percent to 1,336.64 and the JPX-Nikkei Index 400 rose 1 percent to 11,970.62.
$1 = 101.3800 yen Editing by Shri Navaratnam