Nikkei climbs on hopes for better year, weaker yen

(Updates to midmorning)

TOKYO, Jan 5 (Reuters) - Japan's Nikkei average climbed 2.3 percent on Monday, the first trading day of the year, to hit its highest levels in two months as optimism that better times lie ahead lifted shares in the wake of a Wall Street surge.

Honda Motor Co and other exporters climbed on a weaker yen. Resource-linked firms such as trading houses surged as oil jumped more than 3 percent, after an Iranian military commander reportedly called on Islamic countries to cut oil exports to supporters of Israel over Israel's ground offensive in the Gaza Strip.

Shares in Japanese office equipment maker Ricoh Co Ltd gained after the Nikkei business daily said the company and IBM will start sharing each other's sales network this year and promote their servers and printers together.

"Risk aversion has eased in the last week and this has sent both the Dow and the Nikkei higher," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

"There's quite a lot of expectations for the government of (U.S. President-elect Barack) Obama and the policies he's likely to enact, but when he actually takes office this mood may evaporate and a lot of problems still linger."

U.S. stocks surged on Friday as investors discounted discouraging economic data, including Friday's release showing a sharp contraction in factory activity, with anticipation of a turnaround in the second half of 2009 buoying the market.

The dollar rallied to a three-week high against the yen on Friday, the first trading day of 2009, after the strong Wall Street performance encouraged risk appetite. It was fetching around 92.11 yen in Tokyo.

"Though at some point the market will have to face the facts again, it's likely to rise for a while on hopes and expectations," said Yutaka Miura, senior technical analyst at Shinko Securities.

The benchmark Nikkei gained 198.98 points to 9,058.54, its highest level since Nov. 11, in a half-day of trade after earlier climbing more than 3 percent.

It finished 2008 at 8,859.56 to lose 42 percent on the year, its worst year ever.

The broader Topix gained 2 percent to 876.69.

Energy-linked shares surged in the wake of the Middle East troubles and concerns over a deepening row between Russia and Ukraine over gas prices.

Oil and gas field developer Inpex climbed 6.7 percent to 745,000 yen, while Japan's largest trading firm Mitsubishi Corp surged 7.8 percent to 1,335 yen. Fellow trader Mitsui & Co jumped 7.6 percent to 967 yen.

Market players said investors were turning their eyes to shares that had been sold off especially sharply during the last year, with automakers -- among the worst-hit sectors in 2008 -- and financials gaining.

Honda climbed 4.5 percent to 1,992 yen and Toyota Motor Co gained 4 percent to 3,030 yen. Canon Inc rose 3.3 percent to 2,860 yen.

Ricoh rose 1.9 percent to 1,146 yen. (Reporting by Elaine Lies; Editing by Chris Gallagher)