Nikkei up 1.5 pct as soft yen buoys exporters

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By Aiko Hayashi

TOKYO, June 16 (Reuters) - Japan's Nikkei stock average rose 1.5 percent on Monday, as exporters such as Kyocera Corp (6971.T) climbed on a weaker yen and after U.S. data eased worries on Wall Street about inflation and a near-term rise in interest rates.

Mitsubishi Motors Corp (7211.T) rose 2.5 percent to 206 yen after the Nikkei business daily reported the Japanese automaker will tie up with France's PSA Peugeot Citroen (PEUP.PA) in electric vehicles, to supply technology and next-generation batteries. [ID:nT437]

But Nippon Oil (5001.T), Inpex Holdings Inc (1605.T) and other related shares fell after oil prices slipped on news Saudi Arabia was preparing to boost output. [ID:nSYD220885]

"A softer yen sparked hopes for upward earnings revisions for some exporters," said Takahiko Murai, general manager of equities at Nozomi Securities.

"But we have to brace for an eventual dramatic slowdown in Japan, where the stock market and the economy depend on overseas demand, considering recent declines in Asian shares and rising inflation worries in emerging countries."

Murai said that as long as the dollar stays strong, a sudden and large drop in the market is unlikely, but the Nikkei average will likely have a hard time holding above 14,000.

The benchmark Nikkei .N225 gained 205.89 points to end the morning session at 14,179.62, after having lost 3.6 percent last week.

The broader Topix climbed 1 percent to 1,384.61.

U.S. stocks closed higher on Friday, helped by a government report that showed underlying price pressures rose only moderately in May, benefitting technology shares that had been beaten down in recent days on worries about rate increases and weaker overseas sales. [.N]

Market analysts said a rise in U.S. stocks on Friday could be judged as a rebound and was not necessarily enough to keep pushing the Japanese market higher.

Kenichi Hirano, operating officer at Tachibana Securities, said investors were returning to stocks that had been oversold last week, encouraged by a rise in U.S. shares, but gains were stemmed by caution ahead of a torrent of earnings and economic data due this week in the United States.

Major Wall Street investment banks Goldman Sachs (GS.N), Lehman Brothers LEH.N and Morgan Stanley (MS.N) are expected to post poor results this week, with market sentiment hampered by more write-downs and a sizeable loss at Lehman.

The Producer Price Index for May, due on Tuesday, tops the U.S. data agenda, followed by May housing starts, industrial production and a reading for the first-quarter current account.

EXPORTERS IN FAVOUR

Japan's exporters gained as the dollar fetched around 108.27 yen JPY=, holding near a four-month high. A softer yen boosts exporters' overseas profits when they are brought back home.

Electronic parts maker Kyocera climbed 3 percent to 10,450 yen and Canon Inc (7751.T) added 2 percent to 5,550 yen.

Toyota Motor Corp (7203.T) rose 2 percent to 5,600 yen.

Some builders and other issues surged on speculation that they would benefit from new business after a powerful earthquake rocked rural areas of northern Japan. [ID:nT24414]

Tohoku Misawa Homes (1907.T), a builder of prefabricated homes based in the Tohoku region in northern Japan, soared 23.7 percent to 339 yen. Ueki Corp (1867.T), a general contractor with expertise in disaster-recovery related work jumped 20.6 percent to 170 yen. Nissei Build Kogyo (1916.T), another maker of prefabricated homes, climbed 11.3 percent to 118 yen. Shares of Nippon Oil, Japan's largest oil distributor, fell 2.3 percent to 719 yen while Inpex, the country's biggest oil and gas explorer, slipped 3 percent to 1.29 million yen.

Trade was light on the Tokyo exchange's first section where 844 million shares changed hands, compared with last week's morning average of 1.2 billion.

Advancing shares beat declining ones by a ratio of nearly 2 to 1.

(Editing by Brent Kininmont)