Tokyo - Stocks in Tokyo surged Monday on speculation that US automakers would receive a government bail-out and the rise of the dollar against the yen.

The developments outweighed the biggest drop in business confidence among Japan's largest manufacturers in 34 years because analysts said the drop was expected and the market had already factored it in.

The benchmark Nikkei 225 Stock Average gained 428.79 points, or 5.21 per cent, to close at 8,664.66.

The broader Topix index of all first-section issues also was up 33.56 points, or 4.13 per cent, at 846.93.

Shares in Japanese automakers rose on hopes for the US bail-out even as the Bank of Japan's quarterly Tankan survey, which measures confidence among the largest makers of cars and electronics, dropped to minus 24 from minus three. The drop of 21 points was the largest since February 1975.

Japanese manufacturers said in the survey released Monday that they planned sharp cuts in factory output, indicating that many companies are likely to slash more jobs and drastically lower spending, which would push the world's second-largest economy into a deeper recession.

On currency markets at midday (0300 GMT), the dollar was quoted at 90.87-92 yen, up from Friday's 5 pm quote of 89.56-59 yen. A weaker yen makes Japanese manufacturer's goods cheaper overseas and increases their overseas earnings.

The euro was quoted at 1.3455-60 dollars, up from 1.3295-97 dollars late Friday, and at 122.29-34 yen, up from 119.09-13 yen. (dpa)