* Nikkei rises 1.5 pct, Topix adds 0.9 pct * Cyprus reaches deal for 10 bln euro bailout * Exporters, financials lead gains By Tomo Uetake TOKYO, March 25 (Reuters) - Japan's Nikkei share average rebounded strongly on Monday after a sharp fall at the end of last week, as Cyprus and the European Union agreed to a plan to resolve the island's financial crisis. The Nikkei advanced 1.5 percent to 12,517.49 by the midday break after dropping 2.4 percent in the previous session. "Euro-related companies have a pretty good performance so far," a Tokyo-based trader said. "Our house view on Cyprus is that it will be difficult but it will be solved. The big picture is looking quite good, especially for Japan." An EU spokesman said Cyprus and international lenders reached a deal for a 10 billion euro ($13 billion) bailout that would shut down its second-largest bank and inflict heavy losses on uninsured depositors. The agreement came hours before a deadline to avert a collapse of the island's banking system. Nikon Corp and Ricoh Co Ltd, which have significant exposure to Europe, rose 1.9 and 1.5 percent, respectively. Other exporters were also in demand, with Toyota Motor Corp up 0.9 percent and TDK Corp adding 1.8 percent. Consumer financing companies and security houses also led the gains. Aiful Corp and and Orient Corp jumped 8.4 percent and 8.2 percent respectively, while Nomura Holdings advanced 2.6 percent. They were the three most-traded stocks on the main board by turnover. The broader Topix index gained 0.9 percent to 1,047.49, with volume at 45 percent of its full daily average for the past 90 days. "It was the fast money, such as derivatives, that weighed on(Tokyo) stocks in the previous session and that pushed up today's market," said Kyoya Okazawa, head of global equities and commodity derivatives at BNP Paribas in Tokyo. "Fast money investors are seeking to reposition their portfolios, while those who look at fundamentals haven't moved much. The underlying momentum of this market hasn't been changed by the Cyprus issue." The benchmark Nikkei has surged more than 44 percent since mid-November, when Shinzo Abe unveiled his plans for expansionary and monetary policies to revive the world's third-largest economy that swept him to power late last year. HIGHER VALUATIONS The rally has lifted the valuations of Japanese equities, which carry a 12-month forward price-to-earnings ratio of 14.1, a level not seen since August 2010. But they are still below their 10-year average of 16.3, according to Thomson Reuters Datastream. "Fundamentals still look good for Japanese equities. The improving economy will help company earnings. We are looking for further upside from here," said Hidehiro Tomioka, head of equity investment at Manulife Asset Management in Tokyo. Tomioka said he favoured financials, which benefit from Abe's push to reflate the economy, and exporters, which will get lifted by a softer yen. "I prefer the autos rather than electronics because earnings growth is more stable and stronger for the auto companies. Tech companies are not as strong, especially if you look at the competition," he said. Boosted by yen weakness and improving sentiment, more than half of Japanese companies expect a profit rise in the business year starting April, a Reuters poll showed on Friday, but investors looking to gain from the fattened coffers may be dismayed as firms keep the cash-in-house. Data from Datastream showed Japanese companies' outlook on earnings improved further this month. Their one-month earnings momentum -- analysts' earnings upgrades minus downgrades as a total of estimates, rose to 8.7 percent in March from 8 percent last month. It was minus 10.9 percent in November.