* Nikkei gains momentum after breaking 200-day average
* Foreign-led buying pushes Nikkei to 5-mth high 9,992.52
* Softer yen drawing strong short-covering from abroad
TOKYO, Nov 18 (Reuters) - Japan's Nikkei average jumped nearly 2 percent on Thursday to approach the closely watched 10,000 level for the first time since late June as falls in the yen against the dollar drew strong inflows.
Market players said short-covering of financial shares by overseas funds helped spur similar moves in other sectors, with some saying buying was led by European funds to balance their positions ahead of year-end book closings.
The Nikkei picked up momentum after breaking through a long-term trend line of around 9,920, its 200-day moving average, but it shied away from 10,000 as domestic institutional investors appeared to have sold near highs, they said.
"We are seeing inflows into a variety of shares. The trend of the market looked especially strong as we are seeing strong fund flows into financial shares," said Takashi Ohba, a senior strategist at Okasan Securities.
"Foreign fund operators were unloading Japanese government bonds positions while buying back Nikkei futures, driving the overall upward move in stocks," Ohba said.
By mid-afternon the benchmark Nikkei was up 1.7 percent at 9,981.43 after touching a fresh five-month intraday high of 9,992.52.
The broader Topix rose 1.8 percent to 865.36.
In contrast, Japanese government bonds were under selling pressure, with December 10-year futures hitting a fresh two-month low of 141.46.
Data from Japan's Ministry of Finance showed foreign investors were net buyers of Japanese stocks over the past two weeks.
The dollar stood at 83.26 yen, not far off a six-week high of 83.60 yen struck on Tuesday. (Reporting by Aiko Hayashi, Antoni Slodkowski and Chikafumi Hodo; Editing by Michael Watson)