TOKYO, Jan 7 (Reuters) - Japanese shares ended higher on Thursday, with the Nikkei touching a 30-year peak, powered by financials as U.S. bond yields climbed on expectations of larger stimulus following a Democrat sweep in two Senate runoffs in Georgia.

The Nikkei average closed 1.60% higher at 27,490.13, hitting its highest level since August 1990 at one point during the session and snapping a four-day losing streak.

The broader Topix added 1.68% to 1,826.30, climbing above a peak hit late last year to reach its highest level since October 2018.

Investor appetite was not dented by the chaos in Washington D.C. after supporters of President Donald Trump stormed Capitol Hill, forcing Congress to suspend a session to certify President-elect Joe Biden's victory.

"That seemed like the ultimate epitome of four years of Trump's presidency. But no one thinks the election results will be overthrown by this," said Takashi Hiroki, chief strategist at Monex.

Shares of Japanese banks and insurers, big investors in U.S. debt, are highly correlated with U.S. bond yields and were boosted by moves in the Treasury market.

Insurer Dai-ichi Life Holdings rose 7.4%. Among banks, SMFG gained 5.5%, while Mizuho added 3.3% and Mitsubishi UFJ rose 3.5%.

Other cyclical, value shares also gained on hopes of a stimulus package from the incoming Biden U.S. administration.

Steelmakers gained 5.2%, with Nippon Steel rising 7.8%. Ship builder Hitachi Zosen surged 13.7%.

The Democrat victory in the Senate fanned renewed appetite in renewable energy stocks, with Renova jumping 10.6% to a record high.

Domestic leisure-related shares, such as railway companies , bounced back even as the government looked set to impose a one-month state of emergency in Tokyo and three neighbouring prefectures to curb a spike in COVID-19 cases.

"The economic impact would be much smaller than previous declarations as it is confined to Tokyo and restrictions will be limited," said Hiroyuki Ueno, chief strategist at Sumitomo Mitsui Trust Asset Management.

SoftBank Group dropped 1.6% on news that the Trump administration is considering adding Alibaba Group Holding Ltd to its trade blacklist of Chinese companies.

Softbank Group is the largest shareholder of the Chinese e-commerce giant. (Reporting by Hideyuki Sano; Editing by Ramakrishnan M., Kirsten Donovan)