Nikkei up 1.7 pct as blue-chip stocks gain on Wall St

(Updates to midmorning)

TOKYO, March 22 (Reuters) - The Nikkei average jumped 1.69 percent on Thursday with a wide range of blue-chip stocks such as Canon Inc. (7751.T) rising on growing optimism about the U.S. economic outlook following gains on Wall Street.

But shares of Chugai Pharmaceutical Co. Ltd. (4519.T) fell more than 2 percent after Japan's Health Ministry said on Wednesday it had ordered Chugai, which imports the influenza drug Tamiflu, to warn doctors against giving it to teenagers after two new cases of abnormal behaviour were reported.[ID:nSP22801]

"The gains are led by blue-chip stocks after a big rise in U.S. stocks," said Hiroaki Kuramochi, a managing director at Bear Stearns.

"But the advance may be limited as investors are not yet completely optimistic about the U.S. economy because of the subprime mortagage problem."

The Nikkei .N225 was up 290.10 points at 17,453.30 as of 0108 GMT. The broad TOPIX index rose 1.61 percent to 1,735.83.

Declines in the Chinese stock market and turmoil in the subprime mortgage sector have spurred a global market sell-off over the last month.

Kuramochi said banks shares such as Mitsubishi UFJ Financial Group Inc. (8306.T) were also gaining as they are seen as laggards.

"If the Nikkei can be stable in the 17,400s, its next target will be 17,500," Kuramochi said.

Shares of Canon rose 1.4 percent to 6,520 yen, while Mitsubishi UFJ added 3.0 percent to 1.36 million yen.

Chugai was down 2.2 percent to 2,915 yen.