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TOKYO, April 14 (Reuters) - Japanese stocks climbed to their best level this month by midday on Thursday, with stocks continuing to rally as the yen pulled back against the dollar, while gains on Wall Street further burnished sentiment.
The Nikkei share average rose 2.5 percent to end the morning session at 16,782.02, hitting its highest point since March 31. Japan's benchmark index ended the morning session more than a thousand points higher than it began the week.
"We've had a decidedly more bullish mood these last few days, with a bit of encouragement coming from oil prices, a bit of encouragement from China's trade data, and the yen is obviously playing a factor," said Stefan Worrall, director of Japan equity sales at Credit Suisse.
"These are all very encouraging signs that at the very minimum indicate that selling pressure has eased, and which hopefully mark some degree of more sustainable optimism. But that's hard to say for certain given how many people got caught on the wrong side of false dawns and dead cat bounces last quarter."
The dollar climbed to a one-week peak against the yen on Wednesday, signaling a possible end to the Japanese currency's rally against the greenback, which has hurt Japanese exporters and deepened doubts over the efficacy of Abenomics, the economic policies of the prime minister.
Market players said the yen's weakening trend could gain momentum from the fact that it will take time to unwind the glut of long positions that had previously bet on continued yen strength.
Electronics exporter Panasonic Corp gained 3.7 percent while auto exporters Nissan Motor Co Ltd and Toyota Motor Corp each edged up more than 2 percent.
The Topix subindex for iron and steel climbed 5 percent after brokerages began to take a more favourable view of the sector based on inventories and some degree of supply restraint. The sector was lifted in part by JFE Holdings Inc , which soared 7.4 percent after Credit Suisse raised its rating to "outperform" from "neutral," while Kobe Steel rose 9.1 percent.
Supermarket operator Aeon Co Ltd gained 3.6 percent after announcing a profit forecast that was above the consensus view.
The broader Topix climbed 2.1 percent to end the morning session at 1,360.15 with each of its 33 subindexes in positive territory.
The JPX-Nikkei Index 400 rose 2.2 percent to 12,300.98. (Reporting by Joshua Hunt; Editing by Jacqueline Wong)