TOKYO (Reuters) - Japan's Nikkei average gained 4.5 percent on Monday after earlier rising over 5 percent, with exporters such as Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz) climbing in thin trade as the dollar edged up against the yen and Asian shares climbed. Additional support came from domestic demand shares such as Astellas Pharma Inc (4503.T: Quote, Profile, Research, Stock Buzz) and other drugmakers, with retailer Aeon Co (8267.T: Quote, Profile, Research, Stock Buzz) surging more than 7 percent after two company sources said on Saturday that top trading firm Mitsubishi Corp (8058.T: Quote, Profile, Research, Stock Buzz) plans to buy a roughly 5 percent stake in the retailer for more than $324 million. "There's a sense that perhaps Japanese shares had fallen too much," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities, noting that short-covering had apparently emerged. "The yen has lost a little ground against the dollar and the euro, and there's also some reassurance from that." The dollar was fetching around 92.88 yen, while the euro was trading around 118.62 yen. The benchmark Nikkei .N225 gained 359.72 points to 8,276.72 after earlier rising more than 5 percent in the first few minutes of the afternoon session. The broader Topix .TOPX gained 2.9 percent to 809.16. There was also some spillover from other Asian markets, which were climbing sharply. The MSCI index of Asia-Pacific stocks outside Japan .MIAPJ0000PUS was up 5.3 percent. President-elect Barack Obama, who takes office on January 20, began outlining his economic recovery plan on Saturday, saying he aims to create at least 2.5 million new jobs by 2011 and launch the largest U.S. infrastructure investment since the 1950s. Investors continued to watch the fate of the ailing U.S. auto industry. Negotiators tried to forge an agreement in principle to provide the "Big Three" American automakers -- GM (GM.N: Quote, Profile, Research, Stock Buzz), Ford (F.N: Quote, Profile, Research, Stock Buzz) and Chrysler CBS.UL -- with at least $15 billion in short-term loans. The Senate is due back in session on Monday and negotiators hope to have a package ready that can be quickly approved and sent to President George W. Bush as one of the last measures he signs into law before Obama succeeds him as president. But Yamagishi at Mitsubishi UFJ Securities remained wary. "There's some nice direction taking shape, but nothing has really been decided yet," he said. Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz) climbed 5.1 percent to 2,690 yen to become the top contributor to the Nikkei 225 by volume weight. Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz) rose 4 percent to 1,798 yen and Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz) gained 5.6 percent to 1,744 yen. But domestic demand shares, strong since the start of trade, held their own, providing additional support. Astellas Pharma rose 4.9 percent to 4,040 yen, while lifestyle and personal care product maker Kao Corp (4452.T: Quote, Profile, Research, Stock Buzz) gained 3.4 percent to 2,895 yen. Aeon rose 7 percent to 886 yen while Mitsubishi rose 6.9 percent to 1,076 yen.

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