* Sharp soars on news it and Foxconn set to sign deal this week
* Foreigners net sellers so far in 2016, trust banks net buyers
By Ayai Tomisawa
TOKYO, March 28 (Reuters) - Japanese stocks rose to 1-1/2-week highs on Monday morning thanks to a weaker yen, while Sharp Corp jumped on expectations it may finally sign a long-delayed takeover deal with its Taiwanese suitor.
As March 31 is the business year-end for a majority of listed companies, the market was also underpinned by investor purchases of stocks before they go ex-dividend later in the day.
The Nikkei gained 0.7 percent to 17,116.76 in midmorning trade after earlier hitting a high of 17,167.88, the highest level since March 17.
Sharp was the highlight of the morning session, soaring 7 percent after sources said the company and Taiwan's Foxconn are set to sign a takeover deal this week after repeated delays.
"Both trading volume and turnover are increasing compared to last week's sessions," said Hiroyuki Fukunaga, chief executive of Investrust.
Still, Fukunaga said the Nikkei's gains will likely be limited until companies release their full-year earnings in May, especially as foreigners have been net sellers of Japanese equities for the 11 past weeks.
"Since companies like Mitsubishi Corp and Mitsui & Co are expecting surprisingly bad numbers for this fiscal year, the market is braced for more negative news from other companies," he said.
Both trading houses Mitsubishi and Mitsui, whose earnings rely on commodity prices, said last week that they expect their first ever annual losses for the fiscal year ending March.
According to Japan Exchange data, foreign investors have sold a net total of 4.8 trillion yen of Japanese cash stocks in 2016. On the positive ledger, trust banks, which manage corporate pension trusts and national pension fund trusts, have bought a net 1.9 trillion yen in Japanese cash stocks this year.
On Monday, domestic-demand sensitive stocks such as drug makers and retailers and food companies outperformed. Astellas Pharma Inc rose 1.5 percent, Takeda Pharmaceutical Co added 0.9 percent, Isetan Mitsukoshi Holdings surged 2.4 percent, while Kikkoman Corp advanced 1.5 percent.
Exporters were mixed, with Panasonic Corp rising 0.9 percent, Toyota Motor Corp shedding 0.1 percent and Nissan Motor Co adding 0.2 percent.
The broader Topix rose 0.6 percent to 1,374.18 and the JPX-Nikkei Index 400 gained 0.7 percent to 12,419.49. (Editing by Shri Navaratnam)