Nikkei hits 1-mth closing high on autos bailout

* Nikkei ends up 3.2 pct, highest close since Nov. 12

* Benchmark rises to 8,660.24 in 3rd straight day of gains

* Relief over tentative agreement on U.S. bailout buoys

* Automakers surge, exporters lifted by weaker yen

* Sony up 1.1 pct a day after restructuring announcement (Adds stocks, details)

By Elaine Lies

TOKYO, Dec 10 (Reuters) - Japan's Nikkei average rose 3.2 percent to hit a one-month closing high on Wednesday after a tentative deal was reached on a plan to rescue the battered U.S. auto industry, with Japanese automakers surging in relief. Reassurance sparked by the news set off broad short-covering, while a slightly weaker yen buoyed exporters such as Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz) and shippers powered higher as rises in a key freight index helped them extend gains begun earlier this week.

Even Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz) rose, after an initial fall of over 3 percent following Tuesday's announcement it would cut 16,000 jobs, curb investment and pull out of some businesses to save $1.1 billion a year as the financial crisis ravages demand for its electronics products. [ID:nT7887] [ID:nT18401] "While the U.S. auto rescue won't necessarily brake the worsening economy, it does solve the biggest problem left this year, keeping the Big Three from failing," said Takashi Ushio, head of the investment strategy division at Marusan Securities.

"The fact that the U.S. government will save companies whose failure would have been a huge blow to its economy -- and to Japan as well -- is a very strong message."

The White House and congressional Democrats reached agreement in principle on a $15 billion proposal for bailing out U.S. automakers, officials said, though an administration official and a Democratic leadership aide said while the accord covered key points, final issues needed to be resolved. [ID:nL9471247]

But the Nikkei had been rising even before the news came out, lifted by a wide range of factors including Japanese machinery orders data that was in line with forecasts, buying of recently sold-off shares and a number of company-specific factors. And while the general mood was one of relief, some market players remained wary.

"It certainly does lead to reassurance, but this alone isn't enough to keep pushing the market higher and higher," said Yumi Nishimura, deputy general manager of the investment advisory section of Daiwa Securities SMBC.

The benchmark Nikkei .N225 gained 264.37 to 8,660.24, its highest close since Nov. 12, though earlier it had risen as far as 8,704.92.

The broader Topix .TOPX gained 2 percent to 834.55.

LONG-TERM GAINS LIKELY

Over the longer term, Japanese stocks are likely to end next year roughly 13 percent above current levels, 18 analysts and fund managers predicted in a poll conducted by Reuters in the past week. [ID:nL5308524]

But a slim majority felt the market has yet to touch bottom and may retest lows it hit in October, when it lost 24 percent in the worst month in its 58-year history. The Nikkei has lost 43 percent this year.

Automakers surged after the U.S. bailout news, with Honda Motor Corp (7267.T: Quote, Profile, Research, Stock Buzz) rising more than 13 percent at one point before paring gains to close up 10.3 percent at 2,035 yen.

Toyota Motor Co (7203.T: Quote, Profile, Research, Stock Buzz) rose 6.6 percent to 2,930 yen despite Goldman Sachs lowering its operating profit forecast on the company for the year to March 2009 to 208 billion yen ($2.25 billion) from 624 billion yen, expecting further production cuts. Shippers rose after the Baltic Dry Index .BADI, the global freight index of prices for shipping commodities, inched up 1.2 percent on Tuesday, its first gain since mid-November, amid rising steel prices and firm iron ore prices.

Mitsui OSK Lines Ltd (9104.T: Quote, Profile, Research, Stock Buzz), operator of the world's biggest fleet of bulkers for shipping iron ore, jumped 10.4 percent to 550 yen, while Nippon Yusen KK (9101.T: Quote, Profile, Research, Stock Buzz), Japan's biggest shipping company in terms of sales, gained 6.5 percent to 528 yen.

Shares of semiconductor equipment makers such as Tokyo Electron Ltd (8035.T: Quote, Profile, Research, Stock Buzz) gained after the Philadelphia Stock Exchange Semiconductor Index rose nearly 5 percent the previous day.

Tokyo Electron surged 11 percent to 2,715 yen, while Advantest Corp (6857.T: Quote, Profile, Research, Stock Buzz), the world's biggest maker of semiconductor testers, jumped 8.9 percent to 1,267 yen.

Trade was active on the Tokyo exchange's first section, with 2.15 billion shares changing hands, compared with last week's daily average of 1.81 billion.

Advancing stocks outpaced declining ones by 2 to 1. (Reporting by Elaine Lies; Editing by Michael Watson)