Japan stocks up over 2 pct, subprime worries ease

(Updates to midmorning)

TOKYO, Feb 25 (Reuters) - Japanese stocks climbed more than 2 percent on Monday, with financials such as Millea Holdings (8766.T: Quote, Profile, Research, Stock Buzz) powering higher after talk of a U.S. bond insurer rescue plan eased concerns about the subprime loan crisis.

Another boost came from a report in Britain's Times newspaper that China's sovereign wealth fund planned to buy as much as $10 billion in Japanese stocks and may consider purchasing a large stake in oil and gas developer Inpex Holdings Inc (1605.T: Quote, Profile, Research, Stock Buzz), which also climbed. [ID:nT2430]

U.S. stocks staged a late rally on Friday on news that banks were near a deal to bail out bond insurer Ambac Financial, and that a rescue could come this week, though a source told Reuters that while progress has been made the deal might still fall through. [ID:nWEN4067]

"Of course there's questions about how much you can trust this sort of news and it's not a full solution to the subprime problems, but there's no question that the mood has changed," said Noritsugu Hirakawa, a strategist at Okasan Securities. The $200 billion China Investment Corporation may invest in a range of Tokyo-listed companies, including a "sizeable stake" in Inpex, the Times said in its online edition on Saturday, citing unnamed Japanese government sources.

Market players said that while there was still a lack of concrete details on this possibility, as with the Ambac rescue, there was no doubt that it was positive for Tokyo shares.

At 0056 GMT the benchmark Nikkei .N225 was up 2.2 percent at 13,795.92 and the broader TOPIX 2.2 percent higher at 1,350.12.

Insurers surged on the news of the potential Ambac rescue, with Mitsui Sumitomo Insurance Co Ltd 8752.T climbing 10.4 percent to 1,110 yen, Sompo Japan Insurance (8755.T: Quote, Profile, Research, Stock Buzz) jumping 9.3 percent to 976 yen and Millea Holdings up 8.1 percent at 4,000 yen. The insurance subindex was up 7.5 percent, making it the top gainer among the subindices.

It was followed by the mining subindex , which was up 5 percent as metals remained strong, though prices had eased slightly from the record highs touched last week.

Inpex forged higher, gaining 5.3 percent to 1.2 million yen. Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz) was higher after a source said on Saturday that the company planned to start buying TV-use liquid crystal display panels from Sharp Corp (6753.T: Quote, Profile, Research, Stock Buzz) as early as the business year that begins in April [ID:nT2350] -- news that market participants said provided stocks with yet another boost. Sony was up 1.4 percent at 5,090 yen and Sharp up 4.7 percent to 2,090 yen. (Reporting by Elaine Lies; Editing by Chris Gallagher)