Nikkei jumps 3.6 pct after Fannie, Freddie bailout

*Nikkei rises 3.6 percent, biggest percentage gain in 5 mths

*Financial shares surge after bailout of Fannie, Freddie

*Exporters gain on soft yen, improved investor confidence (Adds stocks, details)

By Aiko Hayashi

TOKYO, Sept 8 (Reuters) - The Nikkei average jumped 3.6 percent on Monday, its biggest percentage gain in five months, with financial issues soaring on the U.S. government's bailout of troubled mortgage finance companies Fannie Mae (FNM.N: Quote, Profile, Research, Stock Buzz) and Freddie Mac (FRE.N: Quote, Profile, Research, Stock Buzz).

Japan's biggest banks made double-digit gains, while Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz) and other exporters powered higher on a softer yen and improved investor sentiment, helping the benchmark to erase the sharp losses it booked on Friday on the gloomy outlook for the global economy.

"We seem to have hit bottom for now," said Takahiko Murai, general manager of equities at Nozomi Securities.

"It's a huge step forward now that the U.S. government has started taking drastic measures to deal with financial problems -- one of the two problems we have faced along with the economy."

The takeover of the U.S. finance companies is the latest move by Washington to shore up the slumping housing market and was taken to ward off more global financial market turbulence. [ID:nN07479172] [ID:nN07463067]

U.S. stock index futures surged on Sunday, pointing to a sharply higher opening on Wall Street on Monday after the news. [ID:nN07379425]

The benchmark Nikkei average .N225 added 438.04 points to end the morning session at 12,650.27, the biggest percentage gain since a 4.2 percent advance logged on April 2.

The broader Topix .TOPX shot up 4 percent to 1,217.33.

The dollar climbed 0.7 percent to 108.55 yen <JPY=> and at one point climed as high as 109.05 on EBS. Investors welcome a softer yen as it boosts exporters' overseas profits when they are brought home.

Still, Nozomi's Murai said further gains in the market may be limited due to continuing worries about the global economy.

"The global economy won't recover right away simply because the U.S. has started taking care of its financial problems."

FINANCIAL SHARES IN FAVOUR  Continued...