TOKYO (Reuters) - Japan's Nikkei average gained 1.6 percent and hit a nearly eight-month high on Monday as shippers including Kawasaki Kisen and resource-related shares such as Mitsui Mining and Smelting climbed on the prospect of a recovery in demand from China. News that U.S. automaker General Motors will file for bankruptcy on Monday removed some short-term uncertainty from the market, helping the Nikkei extend gains. Konica Minolta jumped 9.8 percent to 1,088 yen after Goldman Sachs raised its rating on the office equipment maker to "Buy" from "Neutral." But real estate developers were capped after apartment developer Joint Corp filed for bankruptcy protection, underscoring the sluggish state of Japan's property market. "The equity market was lifted by prevailing economic recovery hopes for Japan and elsewhere," said Yoshinori Nagano, a senior strategist at Daiwa Asset Management. "It also drew short-term support on prospects of a key phase in the General Motors story coming to an end, although the longer-term implications of GM filing for bankruptcy still remain to be seen." Analysts said prospects of increased demand from China provided a significant lift. Data showing China's manufacturing sector continued to expand for the third month in a row added to tentative signs the world's third-largest economy is stabilizing. Mitsui Mining and Smelting surged 10.3 percent to 247 yen and Dowa Holdings climbed 8.5 percent to 460 yen. Sumitomo Metal Mining rose 6.8 percent to 1,439 yen. Trading house Marubeni Corp gained 7.2 percent to 462 yen and fellow trader Sojitz rose 6.8 percent to 203 yen. Shippers were also boosted by a rise in the Baltic Exchange's main sea freight index to an eight-month high on Friday, helped by Chinese demand for goods. Kawasaki Kisen surged 7.4 percent to 463 yen, Nippon Yusen rose 5 percent to 479 yen and Mitsui O.S.K. Lines climbed 6.4 percent to 719 yen. The benchmark Nikkei rose 155.25 points to 9,677.75, its highest close since October 7. It earlier hit 9,691.73, its highest since October 8. The broader Topix gained 1.6 percent to 912.52. Toyota climbed 0.3 percent to 3,820 yen and Nissan gained 2.3 percent to 584 yen. Honda fell as much as 2 percent in early trade but closed up 0.3 percent at 3,820 yen, paring losses after the news that General Motors would file for bankruptcy. "The news is positive for share prices of Japanese automakers as their market shares in America will widen almost automatically after this," said Fumiyuki Nakanishi, a manager at SMBC Friend Securities. Joint Corp filed for bankruptcy protection on Friday with about $1.5 billion in debt, becoming the fourth-largest failure by a listed Japanese firm this year. Shareholder Orix Corp, which provided Joint with capital late last year to shore up its finances, was up 0.5 percent at 6,020 yen after hitting 5,610 yen. Mitsubishi Estate Co rose 0.7 percent to 1,575 yen after dropping to 1,514 yen. Mitsui Fudosan Co, Japan's biggest developer, edged up 0.4 percent to 1,591 yen, and Sumitomo Realty dipped 0.5 percent to 1,444 yen. Joint shares were untraded on Monday with their price indicated at 133 yen, down from Friday's close of 213 yen. Sumco, the world's No.2 silicon wafer maker, slid 5.4 percent to 1,390 yen after it revised down its earnings estimates for the six months to July to a net loss of 50 billion yen ($527 million), bigger than its previous estimate of a 37 billion yen loss. Trade was active, with 2.5 billion shares changing hands on the Tokyo exchange's first section compared to last week's daily average of 2.2 billion. Advancing shares outnumbered declining ones by 3 to 1.

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