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TOKYO: Tokyo stocks soared on domestic investors' continued buying in many incentive-backed issues and foreigners' purchases of high-tech shares, brokers said. The Nikkei average ended 536.15 points or 3.17 percent higher at 17,452.72, its highest close since 17,472.94 on February 24.

Shares had been edging up all day and leaped about 100 points in the final few minutes. The 536.15-point rise was the fourth-largest single-day gain this year.

"The Nikkei rose through 17,000, a level that the market had failed several times to break, and that accelerated buying," said Kenzo Doi, analyst at Kokusai Securities.

September Nikkei 225 futures jumped 620 points to close at 17,490 with 28,926 contracts traded.

"In the futures market, we had been regarding 17,040 in (September) Nikkei 225 futures as a critical point, but prices rose through that level without any difficulty. Therefore, people were forced to cover their short positions and prices went up further," a Kankaku Securities broker said.

Futures' gains triggered arbitrage-linked buying in the cash market. There was some talk that covering by Goldman Sachs might have boosted futures as it had recently built up a big short position, but this could not immediately be verified.

The TOPIX index ended up 37.78 or 2.78 percent at 1,394.86, and the Nikkei 300 closed up 7.20 or 2.85 percent at 260.26.

"The rising volume is very encouraging. I believe that today's rise will lead to higher volume, and it is not too optimistic to say that the next target is 18,000 on the Nikkei," Kokusai's Doi said.

Turnover increased to 598 million shares from Monday's 362 million, despite the fact that many Japanes investors were away for summer holidays.

Chartists said the Nikkei's close above its recent high of 17,103.69, hit on May 8, was bullish.

The Nikkei had been moving in a range between 16,100 and 17,000 since July. Traders said today's break-out from that range suggested an uptrend may have been formed.

"Selling by life insurers has apparently been decreasing. Repeated buying by foreigners made it hard for them to sell," an Okasan Securities broker said.

The recent fall of the yen against the U.S. dollar is underpinning sentiment by promising to help profits at a wide range of Japanese companies, especially electrical and auto companies, traders said.

They saw a high level of arbitrage-linked long positions, at 1.47 billion shares as of August 11, as perhaps the most worrying factor for stocks. But while the bull run continues, arbitrage-linked selling will not emerge, they said.

The day saw gainers outnumber declining issues, with 1,010 higher, 83 lower and 73 unchanged.

Advancers were led by the brokerage, airline, fishery, textile and non-ferrous metal sectors. No sectors fell today.

Local individual investors and traders sought shares in companies with big land assets -- real estate, electric railway and department store firms -- on hopes that the government might ease the tax burden on land holdings.

The hopes were fuelled by weekend reports that a senior politician in the Socialist party of Prime Minister Tomiichi Murayama had indicated he would approve of such a step.

Keisei Electric Railway 9009.T rose 29 yen to 701, Mitsui Real Estate Sales 8857.T was up 200 yen to 1,610, and Sumitomo Realty & Development 8830.T up 19 yen to 678.

Shares in Nissan Motor Co Ltd 7201.T surged after Yamaichi Research Institute of Securities and Economics upgraded its rating of Nissan stock to a "1" from "2" because of the weak yen. Nissan climbed 33 yen to 665.

Yamaichi predicted Nissan would post a parent current profit of 10 billion yen in the year to next March, instead of the 20 billion yen loss that Yamaichi originally forecast.

Among blue-chip electrical firms, shares in NEC Corp 6701.T climbed to their highest level since January on what traders said was buying by foreign investors, possibly including U.S. pension funds. NEC ended up 40 yen at 1,180.

The over-the-counter market index climbed above the 1,400 level for the first time since May 10, closing 12.66 points higher at 1,410.66.-Reuter