* Nikkei rises 1.7 pct; Topix up 1.0 pct in active trade * Thursday's buying 'irrational' - analyst * Market may peak out soon - trader * Yen touches 8-1/2-month low vs dollar, buoys exporters * Banks in demand after lagging in the past month's rally By Ayai Tomisawa TOKYO, Dec 13 (Reuters) - Japan's Nikkei average surged above 9,700 for the first time in eight months, led by exporters, as the yen fell to a multi-month low on mounting expectations of aggressive monetary easing by the Bank of Japan after a general election at the weekend. Optimism over a weaker yen helping boost the earnings of Japan's top exporters spread to tech companies in general, prompting analysts to warn of a correction in the near term. The Nikkei rose 1.7 percent to 9,742.73, the highest closing level since April 5. Thursday's advance took the benchmark deeper into "overbought" territory, with its 14-day relative strength index at 76.22. Seventy or above is considered overbought and often signals a possible near-term pullback. "I can understand why 'good' exporters rose but even struggling tech companies were in demand while their restructuring plans are not still clear," said Takuya Takahashi, an equity strategist at Daiwa Securities. "Are they buying Sony and Panasonic on fundamentals? No. Today's buying is somewhat irrational, and I wouldn't be surprised if a correction brings the Nikkei down to 9,500 soon." Toyota Motor Corp rose 1.1 percent, Honda Motor Co added 2.7 percent, Sony Corp advanced 6.4 percent and Sharp Corp was 6.4 percent higher. The yen hit an 8-1/2-month low of 83.67 yen to the dollar as investors bet on bolder moves by the central bank after the election on Sunday. Shinzo Abe, the leader of the main opposition party which is expected to win the election, has called for the bank to adopt extreme policy action, including setting an inflation target of 2 percent and embarking on "unlimited easing". His comments have weakened the yen over the past month and helped boost stocks. "Investors jumped on even struggling companies but that's mainly short-covering," said Makoto Kikuchi, chief executive of Myojo Asset Management, adding that buying in 'quality exporters' which have a competitive edge in overseas markets such as Toyota and Honda was moderate because they have become expensive over the past month. "Buying those tech shares is like 'buying discounted items with damages', and when this type of 'panic buying' occurs, it often means the market will peak out soon." The broader Topix index was up 1.0 percent at 799.21 in active trade, with 2.77 billion shares changing hands on the main board, the highest level since March 9. Last week's daily average volume was 1.91 billion shares. CATCH-UP RALLY Banks also rose on Thursday as investors looked for sectors which have lagged in the rally over the past month. "They have not moved in line with the yen move. They should. Brokers already did. Nomura is up like 40 percent since September, but the banks were left behind," a sales trader said. Sumitomo Mitsui Financial Group climbed 2.7 percent, Mitsubisihi UFJ Financial Group advanced 1.1 percent and Mizuho Financial Group gained 1.5 percent. Nomura Holdings, Japan's top brokerage, rose 4.0 percent. Panasonic Corp surged 7.9 percent to a 1-1/2-month high and was the second most traded stock on the main board by turnover after Barclays Securities raised its ratings on the consumer electronics maker to 'overweight' from 'equal-weight', saying the stock price appeared to have hit bottom. Foreign investors remained net buyers of Japanese equities last week for a fourth straight week. They bought a net 116.5 billion yen ($1.40 billion) of shares in the week through Dec. 1 after purchasing a net 184.3 billion yen in the previous week, data from Japan's Ministry of Finance showed. The Nikkei has rallied 12.5 percent over the past month, taking its year-to-date gain to 15.2 percent, ahead of the performance of its peers in the United States and Europe. The U.S. S&P 500 has risen 13.6 percent so far this year and the pan-European STOXX Europe 600 has gained 16.0 percent.