* Nikkei, dollar both pull away from recent 5-month lows
* North Korea tensions ease, though still in background
TOKYO, April 18 (Reuters) - Japan’s Nikkei stock index took its cue from a rebound in U.S. shares and a weaker yen on Tuesday, pulling away from its recent five-month lows.
The Nikkei was up 0.2 percent at midday at 18,398.24.
The dollar added 0.1 percent at 108.96 yen, after plumbing five-month lows on Monday. It rose after U.S. Treasury Secretary Steven Mnuchin told the Financial Times he agreed with President Donald Trump that the dollar’s strength in the short term was hurting exports, but a strong dollar over the long term was positive.
Wall Street rebounded overnight, as market focus shifted from tensions in North Korea and Syria to earnings later this week, with the S&P 500 pulling off last week’s two-month lows.
“Much-awaited U.S. market rebound lifts the Tokyo market, and investors are not swayed by recent yen strength that usually depresses Japanese stocks,” said Hiroki Allen, chief representative of Superfund Japan in Tokyo.
Risk sentiment also perked up after North Korea’s latest missile blew up almost immediately after its test launch on Sunday.
“Geopolitical risks in this region, particularly in Japan toward North Korea, had sent market sentiment to fairly extreme lows,” said Stefan Worrall, director of Japan equity sales at Credit Suisse in Tokyo.
But even as tensions eased, they did not evaporate. U.S. Vice President Mike Pence warned North Korea on Monday that recent American military strikes in Syria and Afghanistan showed Trump’s resolve should not be questioned, even as Pyongyang vowed to continue its missile and nuclear tests.
Higher rates and the brighter market helped lift Japanese banking and financial shares.
The Tokyo Stock Exchange’s banks subindex rose 1.7 and the securities subindex added 1.3 percent.
Shares of engine maker Daihatsu Diesel jumped as much as 9.2 percent to their highest levels since mid-December, after it raised its group net profit outlook on Monday.
The broader Topix added 0.4 percent to 1,471.47, while the JPX-Nikkei Index 400 also gained 0.4 percent to 13,190.03. (Reporting by Tokyo markets team; Editing by Richard Borsuk)