Nikkei hits 18-month high, exporters up on yen

* Yen's dip to 2-mth low vs dollar buoys exporters

* Short-covering in Nikkei futures adds fuel to rally -trader

* Selling pressure tied to Dai-Ichi Life's IPO seen ebbing

By Masayuki Kitano

TOKYO, March 26 (Reuters) - Japan's Nikkei average surged 1.6 percent and climbed to its highest level in nearly 18 months on Friday, with exporters such as Canon Inc (7751.T) buoyed by the yen's recent dip to two-month lows against the dollar.

Shares in a broad swathe of sectors climbed, including tech shares such as Advantest (6857.T) and Tokyo Electron (8035.T), extending recent gains made on the hopes of strong earnings and improving demand.

The dollar's rise against the yen this week gave a boost to exporters, and a dearth of aggressive selling ahead of the financial year-end seems to be lending support to the broader market, said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

"It's hard to tell what will happen once we are in April, but it seems there are not many people in the market looking to sell before the end of the fiscal year," Ogawa said.

Selling pressure related to Dai-Ichi Mutual Life Insurance's $11 billion initial public offering seems to have peaked, he said. "It seems that moves to secure funds to pay for Dai-Ichi Life's IPO were mostly completed as of yesterday," Ogawa said.

There has been speculation in the market that investors looking to buy Dai-Ichi Life's shares in the IPO may sell some of their other equities holdings to raise necessary cash.

By late trade the benchmark Nikkei .N225 was up 168.48 points at 10,997.33, having touched a peak of 11,001.59, its highest level since early October 2008.

The broader Topix climbed 1.4 percent to 965.78 .TOPX.

Stop-loss short-covering in Nikkei 225 futures JNIc1 added to the market's firm tone, said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.

Tokyo Electron, a manufacturer of semiconductor making equipment, climbed 2.3 percent to 6,180 yen after saying it expects to post smaller operating and net losses than it previously forecast.

Mazda Motor Corp (7261.T) rose 2.1 percent to 247 yen after the Nikkei business daily said Mazda would introduce a midsize hybrid vehicle by 2013 based on core components supplied by Toyota Motor Corp (7203.T). [ID:nSGE62O0IS]

Toyota edged up 1.1 percent to 3,745 yen.

Nissan Motor Co (7201.T) rose 1.0 percent to 776 yen, underperforming the broader market, after the Nikkei business daily reported that the carmaker and Daimler AG (DAIGn.DE) are in the final stages of talks to take stakes of under 5 percent in each other. [ID:nSGE62O0IQ]

Among other gainers, Canon rose 1.9 percent to 4,265 yen, Advantest gained 3.1 percent to 2,329 yen. (Additional reporting by Elaine Lies; Editing by Michael Watson)