Nikkei up 0.8 pct as soft yen buoys exporters

(Adds detail, stocks)

By Aiko Hayashi

TOKYO, May 30 (Reuters) - The Nikkei stock average rose 0.8 percent on Friday, with exporters such as Canon Inc (7751.T) finding favour on a softer yen and a rise in U.S. stocks on receding inflation and recession fears.

Nippon Paper Group Inc (3893.T) jumped 4.5 percent after the Asahi daily reported that it and Rengo Co (3941.T) were considering integrating their managements to create Japan's biggest paper maker, though the firms denied the report. [ID:nT243191]

"The biggest factor for the rise is the softer yen, with bonds being almost flat, while another supporting factor is expectations for gains in U.S. stocks tonight after Dell's earnings," said Yutaka Miura, deputy manager of the equity information department at Shinko Securities.

Dell Inc (DELL.O), the No. 2 personal computer maker, reported earnings after the closing bell that beat Wall Street's expectations. [ID:nN29371124]

The benchmark Nikkei average .N225 added 115.88 points to finish the morning session at 14,240.35 after hitting its highest since May 19. It rose 3 percent on Thursday.

The broader Topix index climbed 1.1 percent to 1,396.07.

Japanese annual inflation dipped to 0.9 percent in April from a year earlier, below expectations, while industrial output fell 0.3 percent in April from a month earlier, matching the median market forecast, data showed before the market opened.

"The economic data before the open were within expectations, but indicated a slowdown trend in the economy," Miura said.

The dollar rose 0.1 percent from late Thursday U.S. trade to 105.62 yen JPY=, hovering near a three-month high struck on Thursday.

Katsuhiko Kodama, senior strategist at Toyo Securities, said hedge funds seem to be structuring their positions on the view that stocks are resilient in the face of inflation.

"Japanese stocks are unexpectedly rising as those investors expect a shift from bonds to stocks," he said.

EXPORTERS GAIN

Canon gained 2.5 percent to 5,680 yen and Toyota Motor Corp (7203.T) added 2.1 percent to 5,300 yen. Investors had fretted over a stronger yen as it dents exporters' overseas profits when they are brought back home.

Nippon Paper jumped 4.5 percent to 305,000 yen, while Rengo was flat at 719 yen.