By Tomo Uetake
TOKYO (Reuters) - Tokyo stocks rebounded on Monday morning, spurred by gains for exporters as the yen weakened to a seven-month low against the dollar after a gathering of central bankers underlined the diverging paths of interest rates in Japan and the United States.
By the midday break, the benchmark Nikkei average rose 0.2 percent to 15,569.57 points. It shed 0.3 percent on Friday, breaking a nine-day winning streak - the longest since December.
"Although the market dropped on Friday on profit-taking, the yen's weakness is providing psychological support, or at least making market players reluctant to sell," said Yasuo Sakuma, portfolio manager at Bayview Asset Management.
The dollar climbed to as high as 104.49 yen, as investors wagered that interest rates in the United States would rise much earlier than those in Japan and Europe.
At a gathering of central bankers in Jackson Hole, Fed chair Janet Yellen nodded to the concerns of some Fed officials about the sustained level of monetary policy stimulus, even as she stressed the need to move cautiously on raising rates.
"After a choppy ride so far in 2014, it finally feels like both the Nikkei and the yen are ready now for their next key 'leg up' in this extended Japan rally that began with Abenomics back in late 2012," said Stefan Worrall, director of equity cash sales at Credit Suisse in Tokyo.
Exporter led the way. Sony Corp advanced 0.8 percent, Panasonic Corp gained 0.6 percent and Toyota Motor Corp edged the morning session up 0.4 percent.
Murata Manufacturing Co Ltd rose 0.9 percent after the electronic parts maker said it would buy the part of U.S. radio frequency chipmaker Peregrine Semiconductor Corp it does not already own for $465 million in cash.
Support for stocks was also seen on hopes of more buying from the Bank of Japan and others in the domestic public sector, including the $1.2 trillion Government Pension Investment Fund.
Exchange data showed trust banks, which act on behalf of public investors such as the GPIF, bought a net 82.7 billion yen(794 million US dollar) of stocks last week, their largest net buying in almost two months.
Insurers bucked the trend, with traders citing concerns over a significant rise in insurance claims following severe damages from torrential rains in western Japan.
The insurance companies subindex was the third-worst performer among the Tokyo Stock Exchange's 33 industry sub-indexes on Monday morning, declining 0.6 percent.
Tokio Marine Holdings Inc and MS&AD Insurance Group Holdings Inc shed 1.3 percent and 0.8 percent, respectively.
The broader Topix rose 0.2 percent while the new JPX-Nikkei Index 400 added 0.1 percent.
(1 US dollar = 104.1900 Japanese yen)
(Editing by Shri Navaratnam)