Japan stocks up as exporters gain on U.S., yen

(Updates to midmorning)

TOKYO, Dec 25 (Reuters) - Japanese stocks rose across the board on Tuesday, with exporters such as Sony Corp (6758.T) particularly in favour on a soft yen, while bank shares boosted higher after news from Merrill Lynch MER.N helped spark a rally in U.S. peers.

One notable stock was NTT DoCoMo Inc (9437.T), which jumped nearly 3 percent, after the Nikkei business daily said DoCoMo would tie up with Google Inc (GOOG.O) with a view to adopting the Web giant's search and email features in its mobile phone Internet service. [ID:nT212997]

"Today's market is simply reflecting rallies in overseas markets during the long weekend," said Tsuyoshi Segawa, an equity strategist at Shinko Securities. "The yen's trading on the 114 yen level also helps exporters by relieving worries about the possibility of downward earnings revisions."

All Japanese financial markets were closed on Monday for a public holiday, the day following the Emperor's Birthday.

"Still, the scenario that subprime problems dictate the direction of the U.S. market is unchanged," Segawa said. "The focus will shift to the problems' fallout on the real economies next year."

As of 0044 GMT, the benchmark Nikkei average .N225 was up 1.8 percent or 281.23 points at 15,538.23 after rising more than 2 percent earlier. For the past week, it shed 1.7 percent.

The broader TOPIX index gained 1.8 percent or 25.73 points to 1,494.93.

On Monday in New York, the yen dipped to a six-week low against the dollar. In Asian trading it was up 0.3 percent at 114.42 yen JPY=.

U.S. stocks rallied on Monday, led by financial companies, after Merrill Lynch shored up its capital base by as much as $7.5 billion.

A softer yen benefits shares of exporters as it boosts profits when earnings from abroad are brought home.

Shares of Sony climbed 2.5 percent to 6,260 yen, while Kyocera Corp (6971.T) gained 2 percent to 10,010 yen and Fanuc Ltd (6954.T) advanced 2.5 percent to 10,980 yen.

Financial shares shone with top bank Mitsubishi UFJ Financial Group (8306.T) jumping 4 percent to 1,083 yen and No. 2 Mizuho Financial Group (8411.T) adding 3.9 percent to 558,000 yen.

Shares of DoCoMo were up 2.7 percent at 189,000 yen. (Reporting by Aiko Hayashi; Editing by Mike Miller)