(Corrects typo in third bullet point)
* Nikkei ends at 5-month high and session peak of 10,013.63
* Foreign-led buying triggers break beyond 200-day MA
* Softer yen brightens outlook, prompts buying from overseas
By Aiko Hayashi and Chikafumi Hodo
TOKYO, Nov 18 (Reuters) - Japan's Nikkei jumped more than 2 percent to close above 10,000 for the first time since late June on Thursday as a fall in the yen against the dollar attracted strong fund inflows from overseas to bolster financial shares.
Active short-covering of banks and other financials by overseas fund operators 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 in the afternoon after breaking through the psychologically sensitive 200-day moving average of 9,920, with strong buying from overseas swallowing up profit-taking orders by domestic institutional investors, traders said.
"We are seeing inflows into a variety of shares. The market trend 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.
The benchmark Nikkei advanced 201.97 points, or 2.1 percent, to close at its session peak of 10,013.63 -- its highest finish since June 22.
The broader Topix rose 2.2 percent to 868.81.
Ohba said strong inflows into financial shares typically suggest the market trend is bullish.
Banking shares gained, with Japan's top lender Mitsubishi UFJ Financial Group jumping 4.3 percent to 412 yen and Mizuho Financial Group rising 3.9 percent to 134 yen.
In contrast, December 10-year Japanese government bond futures closed down 0.51 point at a session low and at a fresh two-month trough of 141.45.
"Global fund managers could be adjusting their portfolios by allocating more into stocks, while selling bonds," said Tomomi Yamashita, a fund manager at Shinkin Asset Management.
"Japan is standing out now as we are seeing inflows from overseas as Japanese shares have been kept at low levels until recently, but we are not sure whether this will be a long-lasting trend. We need to watch a little longer," Yamashita continued.
Data from Japan's Ministry of Finance showed foreign investors were net buyers of Japanese stocks over the past two weeks.
HELPED BY EXPORTERS
The Nikkei was encouraged after seeing Chinese shares rebound.
Japanese stocks rose also due to anticipation of a recovery in U.S. shares later in the day following an initial public offering by General Motors Co.
General Motors pulled off the biggest IPO in U.S. history on Wednesday, raising $20.1 billion after pricing shares at the top of the proposed range in response to huge investor demand.
"A rebound in Shanghai and Hong Kong shares after they were hurt by worries about rate hikes in China is lending help to the market," said Fumiyuki Nakanishi, a manager at SMBC Friend Securities.
"There's also speculation that GM's listing will lift New York stocks later today. GM is still a major stock in the United States and a rise in its shares ... will be positive for investor confidence," he added.
U.S. stocks futures were up 0.8 percent.
The dollar stood at 83.15 yen, not far off a six-week high of 83.60 yen struck on Tuesday.
A slightly weaker yen has recently been helping exporter shares such as TDK, which rose 1.9 percent to 5,360 yen.
Defensive shares also found favour with drugmaker Takeda Pharmaceutical Co closing up 2.6 percent at 3,970 yen, while household goods maker Kao up 1.8 percent at 2,154 yen.
Mitsubishi Electric Corp rose 4 percent to 830 yen after Chief Executive Kenichiro Yamanishi told the Nikkei business daily the firm wants sales to recover to 4 trillion yen by the financial year to March 2014.
The diversified electronics maker expects sales in the current financial year to March 2011 to reach 3.56 trillion yen. (Additional reporting by Antoni Slodkowski; Editing by Joseph Radford)