Japan stocks surge 3.5% on return from holiday with weak yen's support

TOKYO (Reuters) -- The Nikkei Stock Average was up 3.5% on Tuesday, with tech shares leading the rally as sentiment was boosted from a weaker yen when traders returned after a public holiday.

The the benchmark exchange ended the day at the session's peak of 36,232.51, trending higher in the last 40 minutes of trading. It spent much of the day flitting back and forth across the psychological 36,000 level, a level it hadn't breached since Aug. 2.

The broader Topix climbed 2.8%.

Chipmaking equipment giant Tokyo Electron led Nikkei gainers by index points with a 6.2% rally. Chip-testing machine manufacturer Advantest was next, advancing 7.7%.

Major exporters Sony Group and Toyota Motor rose 5% and 3.3%, respectively, as a weaker yen inflates the value of overseas sales when repatriated.

The Japanese currency declined about 0.3% to 147.64 per dollar as of 3 p.m., extending a 0.4% slide from overnight.

Japanese equity markets were closed on Monday for the Bon holiday (a period in mid-August for honoring the dead).

The yen had strengthened as far as 141.675 per dollar on Aug. 5 for the first time since the start of this year after surprisingly soft U.S. monthly payrolls figures ignited fears of a recession. The Nikkei average had slumped to as low as 31,156.12 on that same day for the first time in almost nine months.

U.S. macro data has improved since then, but the economic outlook faces a crucial week with the release of producer inflation data later on Tuesday, followed by consumer inflation data on Wednesday and retail sales a day after.

"What's really in focus is whether we see a slowdown in U.S. consumption, or in the U.S. economy as a whole," said Maki Sawada, an equities strategist at Nomura Securities.

"The reaction in