TOKYO (Reuters) - Japan's Nikkei average climbed 5.2 percent on Monday to its highest close in a week, with machinery shares such as Komatsu (6301.T: Quote, Profile, Research, Stock Buzz) surging on hopes for economic stimulus packages being enacted around the world. But, in a sign that some in the market still remain wary, domestic demand shares -- seen as resilient in the face of global economic turmoil -- such as Eisai Co Ltd (4523.T: Quote, Profile, Research, Stock Buzz) and other drugmakers also gained.
Retailer Aeon Co (8267.T: Quote, Profile, Research, Stock Buzz) shot up 6.2 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, and the two will tie up on overseas procurement amid the economic downturn.
The widespread buying was supported by spillover energy from strong gains in other Asian markets, with the MCSI index of Asia-Pacific stocks outside Japan surging 6.3 percent despite Friday data showing over half-a-million U.S. jobs were lost in November, the most in 34 years.
"The Nikkei has been lagging Wall Street and other Asian stocks, which have gained recently, so today it was making this up," said Hiroaki Osakabe, fund manager at Chibagin Asset Management.
"Despite bad U.S. jobs data, markets are gaining on a sense that they've hit the bottom and expectations for economic stimulus measures being put out by many governments." The benchmark Nikkei .N225 gained 411.54 points to 8,329.05 after earlier rising as high as 8,358.27. It lost 7 percent last week.
The broader Topix .TOPX rose 3.3 percent to 812.08. U.S. 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 also eyed the fate of the 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 U.S. 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.
MACHINERY MARCHES UPWARDS
One of the biggest beneficiaries of hopes for the stimulus packages were machinery shares, with the machinery sub-index gaining 6 percent.
Komatsu, the world's second-biggest maker of earth moving equipment, shot up by 11 percent to 1,007 yen, while Hitachi Construction (6305.T: Quote, Profile, Research, Stock Buzz) surged 11.6 percent to 963 yen.
Exporters gained in general as investors made up for lost time, buying beaten-down shares on a sense that the Nikkei has been oversold recently, said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.
Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz) climbed 5 percent to 1,736 yen and Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz) rose 4.9 percent to 2,685 yen. Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz) rose 5.5 percent to 1,825 yen.
But some in the market remained wary nonetheless, keeping domestic demand shares solid as well.
"There's many things taking on a good direction in the United States, but nothing has really been decided yet," said Yamagishi.
Eisai rose 8.2 percent to 3,420 yen while Astellas Pharma Inc (4503.T: Quote, Profile, Research, Stock Buzz) gained 4.2 percent to 4,020 yen. Lifestyle and cosmetics company Kao Corp (4452.T: Quote, Profile, Research, Stock Buzz) gained 3.9 percent to 2,910 yen.
Toto Ltd (5332.T: Quote, Profile, Research, Stock Buzz), Japan's largest manufacturer of toilets and other sanitary earthenware, climbed 9.6 percent to 580 yen.
Aeon rose 6.2 percent to 879 yen while Mitsubishi rose 8.5 percent to 1,093 yen.
Trade was moderate on the Tokyo exchange's first section, with 1.86 billion shares changing hands, compared with last week's daily average of 1.81 billion.
Advancing stocks outpaced declining ones by nearly 7 to 1.
