By Hideyuki Sano TOKYO, June 11 (Reuters) - Japanese stocks bounced back from three-week lows on Thursday on hopes that the European market for Japanese exports will improve as Greece inched closer to reaching a cash-for-reform deal with its creditors.
Investors also picked up domestic demand-oriented shares such as railway companies and financials, betting that the Japanese economic recovery will remain firm and as the yen recovers from 13-year lows.
The Nikkei share average is on course to snap its four-day losing streak, rising 1.3 percent to 20,309.36, bouncing off Wednesday's three-week low of 20,016.32 hit on concerns about rising bond yields around the globe.
The Nikkei's gains were driven primarily by improved sentiment in global markets on Greece as the country's Prime Minister Alexis Tsipras agreed to intensify negotiations with its creditors after having met the leaders of Germany and France.
While high volatilities in bond markets are likely to keep many investors on guard for now, Japanese stock prices are likely to be supported by expectations for a solid recovery in earnings and higher shareholder returns.
"Given rises in Japanese bond yields are limited compared to the U.S. and Europe, Japanese stocks look more attractive than U.S. and European shares," also said Hiroshi Ono, manager of equity investment at Sumitomo Life Insurance.
Although Japanese bond yields have risen in sympathy with bond yields elsewhere, the 10-year yield still stood relatively low at 0.54 percent, compared to around 1 percent in Germany and 2.5 percent in the United States.
Leading the gains on Thursday were land transport companies , which scored gains of 3.7 percent, by far the best performer among the Tokyo Stock Exchange's 33 industry subindexes.
Central Japan Railway rose 5.6 percent while West Japan Railway gained 4.7 percent and East Japan Railway 3.6 percent.
Bank shares gained 1.8 percent. They have been rising on hopes that banks may buy back their own shares as well as on their relatively inexpensive valuations.
Mizuho Financial rose2.3 percent, Mitsubishi UFJ Financial Group 2.6 percent and SMFG 0.8 percent.
The three banks were the top gainers among the Topix core 30 for the current April-June quarter.
The yen's sharp rebound from a 13-year low in the past few sessions has encouraged investors to focus on domestic-demand oriented shares, while exporters also found support.
Toyota Motor rose 1.6 percent, while car parts maker Denso Corp. rose 2.2 percent.
The broader Topix gained 1.4 percent to 1,650.13.
(Editing by Simon Cameron-Moore)