* Nikkei rises 2 pct, Topix gains 1.7 pct as yen slumps * Economically sensitive stocks, finanicals lead the gains * Sharp Corp falls on Hon Hai capital doubt By Tomo Uetake TOKYO, Feb 25 The Nikkei average soared 2 percent to a 53-month high on Monday as the yen sank after sources said Japan is likely to nominate Asian Development Bank President Haruhiko Kuroda, an advocate of aggressive monetary easing, as its next central bank governor. Economically sensitive stocks led the gain after the yen hit a 33-month low of 94.77 yen to the dollar on Monday, while financials and real estate companies also advanced as they stood to benefit from reflationary policy. By the midday break, the Nikkei climbed 221.76 points to 11,607.70 after briefly hitting 11,618.53, its highest level since late September 2008. "Earlier this month, the market priced in the possibility of (Toshiro) Muto, who is seen less aggressive, as the most probable candidate," said Kyoya Okazawa, head of global equities and commodity derivatives at BNP Paribas in Tokyo. "This has capped the gains to some extent. (But) as Kuroda emerged as the frontrunner to win the government nomination, investors are chasing the market higher today." Sources told Reuters on Monday that the government is likely to nominate Kuroda as its next central bank governor. Prime Minister Shinzo Abe is also seen filling one of two deputy governor posts with Kikuo Iwata, an academic critical of Bank of Japan policy and an advocate of unorthodox monetary easing steps, the Nikkei newspaper reported. "Kuroda has been his top pick for a long time. Abe seems to have gained confidence during his U.S. visit. That made him go ahead with his original plan," BNP Paribas' Okazawa said. "If the report is right, it means Abe has won, the BOJ has lost and for the Ministry of Finance, it's a draw. There will no longer be any resistance or opposition to Abenomics," Okazawa added. "For the markets, it means the yen is likely to fall. It's also positive for Japanese equities." The benchmark Nikkei has rallied nearly 34 percent since mid-November, driven by a weaker yen as Abe pursued bold fiscal expansionary and monetary easing polices aimed at reigniting the economy. SHIPPERS, FINANCIALS HIGHER Sea transport sub-index rose 5.6 percent as the best sectoral gainer on the main board, with Kawasaki Kisen Kaisha Ltd jumping 9.3 percent, Mitsui OSK Lines Ltd gaining 4.6 percent and Nippon Yusen KK advancing 4.1 percent. A sector upgrade from Morgan Stanley MUFG also boosted the stocks. Lender Mizuho Financial Group and Mitsubishi UFJ Financial Group rose 2.5 percent each and were the top most and the second most traded stock, respectively, while real estate company Mitsui Fudosan climbed 5 percent. Boosted by the yen's sharp fall, Japanese companies' earnings outlook has improved sharply. Their one-month earnings momentum -- analysts' earnings upgrades minus downgrades as a total of estimates -- rose to 8 percent from 3.6 percent in January, data from Thomson Reuters I/B/E/S showed. In contrast, earnings momentum for U.S. companies remained in negative territory in February, while that for European firms deteriorated further. The broader Topix rose 1.7 percent to 980.05, with volume at 65 percent of its full daily average for the past 90 trading sessions. Other notable gainers included Kobe Steel Ltd, up 5.8 percent after the steelmaker said on Friday evening it was bidding for a contract to build a $1.1 billion city gas-fired power plant by 2021 to supply electricity to Tokyo Electric Power Co.. Sharp Corp was one of the 10 losers on the Nikkei, down 6.5 percent after sources said the consumer electronics maker was unlikely to include a capital infusion from Taiwan's Hon Hai Precision Industry Co Ltd in its turnaround plan as talks between the firms have hit a snag.
The Pentagon releases photographs linked to allegations of abuse of detainees in Iraq and Afghanistan.