TOKYO, Jan 9 (Reuters) - Japanese shares jumped the most in nearly a month on Thursday, recovering all the losses from the previous session, after the United States and Iran signalled their desire to avoid further military conflict.
The benchmark Nikkei index ended up 2.31% at 23,729.87, its biggest one-day percentage increase since Dec. 13.
The Nikkei erased Wednesday's 1.57% decline, triggered by Iranian missile attacks on facilities hosting U.S. military forces in Iraq in retaliation to the U.S. killing of a prominent Iranian general last week.
The attack initially roiled global financial markets as it stoked fears of a wider conflict in the Middle East.
However, markets regained their composure after U.S. President Donald Trump said there were no casualties and the United States did not necessarily have to hit back.
Iranian Foreign Minister Mohammad Javad Zarif also said the missile strike "concluded" Tehran's response to the U.S. killing last week of Qassem Soleimani, who was responsible for building Iran's network of proxy armies across the Middle East.
"For now there is a sense of relief, but there could be more problems in the future if the Iranian public does not accept this pause in hostilities," Yutaka Masushima, a market analyst at Monex Securities in Tokyo.
"Excluding geopolitical risks, there is a strong case for Japanese equities to push higher. Data from the United States and Europe suggest that the global economy is improving, which means Japanese corporate earnings will bottom out soon and start rising."
The technology and consumer discretionary sectors led the advance as shares of electric part maker Omron Corp and video game maker Bandai Namco Holdings Inc rose.
There were 217 advancers on the Nikkei index against eight decliners on Thursday.
The largest percentage gainers in the index were online media company CyberAgent Inc up 6.77%, followed by semiconductor manufacturing equipment maker Screen Holdings Co Ltd gaining 6.1%, and photography and medical device maker Fujifilm Holdings Corp, up 6.04%.
The largest percentage losers in the index were oil and natural gas developer Inpex Corp, down 2.7%, followed by oil refiner JXTG Holdings Inc losing 2.68%, and engineering company JGC Holdings Corp ending 1.44% lower.
The broader Topix index rose 1.63% to 1,729.05.
The volume of shares traded on the Tokyo Stock Exchange's main board was 1.15 billion, compared to the average of 1.12 billion in the past 30 days. (Reporting by Stanley White; Editing by Rashmi Aich)