* Japan stocks seen as overvalued for 1st time in 4 yrs - BOFA Merrill * Sony surges as U.S. fund calls on company to spin off unit * Exporters lead gains on further yen weakness * Higher bond yields weigh on real estate firms, non-banks By Tomo Uetake TOKYO, May 15 (Reuters) - Japan's Nikkei average rose 2.3 percent on Wednesday, breaking above 15,000 for the first time since January 2008, with Sony Corp surging after an activist U.S. fund called on the company to spin off and list its lucrative entertainment unit. The market's run to a fresh 5-1/2 year high was underpinned by further weakness in the yen and a strong performance from Wall Street, which was boosted by signs of better economic growth. The benchmark Nikkei advanced 337.61 points to 15,096.03, after rising as high as 15,108.83, levels last visited in January 2008. Sony soared 10.4 percent to its highest level in 22 months and was the fifth-most traded stock on the board by turnover. Hedge fund investor Daniel Loeb said his Third Point hedge fund had accumulated a little more than 6 percent of Sony's shares, worth $1.1 billion, making it the largest stakeholder in the inventor of the Walkman portable music player and Trinitron TV. Loeb on Tuesday called on Sony to spin off its lucrative entertainment arm, setting the stage for a clash between his activist Wall Street fund and management at the Japanese electronics maker. "Theoretically such a plan (spin off) is possible. If the proposal is accepted, although I don't think Sony will do so, the company's value would surely go up," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management, adding that main buyers are likely retail investors who are playing catch-up with its ADRs. Other exporters also were in the spotlight, with Toyota Motor Corp gaining 3.7 percent, Panasonic Corp surging 5.4 percent and Nikon Corp jumping 6.3 percent, after the dollar climbed as high as 102.40 yen on Tuesday, the highest level in 4-1/2 years. The dollar last traded at 102.24 yen. The broader Topix gained 1.8 percent to 1,252.85 in very active trade, with trading volume hitting a six-week high of 5.75 billion shares and the second highest this year. The Nikkei index has gained more than 6 percent since last Thursday, when the dollar broke above 100 yen. FOREIGN BUYING SEEN HELPING LIFT MARKET IN MID-TERM Analysts said that strength in overseas shares has encouraged the risk-on mood, which has drawn money into the Japanese market despite the rapid pace of gains in the Nikkei over the past week. According to Bank Of America Merrill Lynch's May fund manager survey, Japan equity allocations are 31 percent overweight, with this trend increasing for the fifth straight month. "This also marks the first time in approximately four years that the Japanese stock market has been seen as overvalued," the bank's equity strategist Naoki Kamiyama wrote in a report. "Last month saw a major swing toward the view that the BOJ's policies would promote inflation, and this persisted in May, with fund managers believing inflation will rise. In sector allocations, autos remained most popular." The Nikkei has surged more than 45 percent this year on the back of bold government and central bank policies to revive the third largest economy. The sharp rise in the market has also prompted some investors to lock in profits on sectors which are sensitive to rising long-term interest rates. Real estate stocks and consumer lenders underperformed, with Nomura Real Estate Holdings Inc shedding 2.5 percent and Tokyu Land Corp dropping 3 percent. Aiful Corp nosedived 21.1 percent and Orient Corp tumbled 14.8 percent. The 10-year Japanese cash bond yield, a benchmark for the country's long-term interest rates, rose to 0.92 percent on Wednesday, its highest since April 2012. "I don't see the recent rise in domestic government bond yields as bad as it wasn't triggered by concerns over Japan's fiscal situation," said Naoki Fujiwara, fund manager at Shinkin Asset Management. Fujiwara said the benchmark Nikkei is expected to tread in range, likely to trade around 15,000 level, until some new catalyst develops come out. "The market needs some new positive developments to chase the stocks higher. At the same time, there is no big reason to sell the stocks."