* Nikkei, Topix up 1.6%; Topix closes chart gap
* Tech shares track gains in U.S. peers
* Domestic demand-related shares rise amid Middle East tensions
By Hideyuki Sano
TOKYO, Jan 7 (Reuters) - Japanese shares rebounded on Tuesday, with tech and domestic demand-oriented sectors leading the gains, as investors were relieved at the absence of fresh sabre rattling between the United States and Iran.
The Nikkei share average .N225 rose 1.60% to 23,575.72, recovering much of its losses posted in the previous session, though it failed to break above a resistance from 25-day moving average at 23,614.
In a positive sign for bulls, the broader Topix .TOPX gained 1.62% to 1,725.05, already closing the chart gap made during the New Year holidays in just one day.
The mood calmed a little as there was no new aggression after Iran and the United States traded threats following a U.S. air strike killing a top Iranian commander, with Wall Street ending in positive territory on Monday. MKTS/GLOB
"The markets are hoping that there will be no full-scale military confrontation. The U.S. side probably doesn't want a war in an election year, neither does Iran, which is already hit by sanctions," said Masayuki Doshida, a senior market analyst at Rakuten Securities.
A broad range of shares rallied, with 90% of shares on the main board chalking up gains, the highest ratio since Sept 5, 2019.
Shares in kettle maker Zojirushi Corp 7965.T jumped 14.1% to a record high after an official filing showed its top shareholder changed the purpose of its investment.
Technology shares were in favour following their U.S. peers' outperfomance on Monday.
Investors also flocked to domestic demand-oriented shares, which are perceived to be less vulnerable to external shocks such as the Middle East tension.
Recent IPO stocks fared well as Japanese retail investors saw a chance for quick gains, given the firmness in start-up shares in the past several months.
The index of the Jasdaq start-up market .NOTC , which has been rising steadily since September, rose 1.07%.
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