Tokyo stocks rose sharply Monday, with the key Nikkei stock index gaining 2.05 percent extending gains for a fourth successive day as U.S. jobs data beat economists' expectations and fears were eased about the world's largest economy falling into a double-dip recession.

The highly anticipated U.S. nonfarm payrolls climbed 67,000 after a revised 107,000 increase in July, more than initial forecasts, Labor Department figures in Washington showed.

Analysts had expected payrolls to decline by 100,000, following a 131,000 slump in July, but the robust figure added to positive pending sales of existing U.S. houses in July and an increase in manufacturing output, spurred buying as investors, sidelined in anticipation of the latest jobs data, returned to assets which lent support to the market, instead of fleeing to currencies which would have pushed the yen up higher.

The yen has reached 15-year highs against the U.S. dollar recently, but as fears are allayed about the health of the U.S. economy investors are returning to riskier assets such as shares, brokers said.

"We could see modest buying going forward unless there is any big change in overseas stock markets," said one local analysts.

"That said, we don't know what will happen in the currency market. The yen hasn't weakened (against the dollar) and we haven' t come to a point where we can say the (Nikkei's) downside has been consolidated," he said.

Other analysts were even more circumspect, maintaining that predications as to exactly what would happen if the yen were to rise above Japanese companies' assumption rates for dollar/yen at 90 yen and at 110-115 yen for euro/yen in the year to March 2011.

"The jobs data was better than expected but it's not as if it improved drastically. And as a result, there hasn't been a reversal in the yen's strength," said Masayuki Otani, chief market analyst at Securities Japan, Inc.

"Worries about the strong yen are the biggest reason why the benchmark is finding it difficult to go higher. Market players remain on alert as they don't know what would happen if dollar/yen trades at the 83 yen level again."

However, the yen depreciated to 84.50 against the U.S. dollar and to 108.90 against the euro, providing Japanese companies reliant on profits made abroad some relief, as a weaker yen boosts the value of overseas sales when yields are transferred into the home currency.

The 225-issue Nikkei Stock Average advanced 187.19 points from Friday to 9,301.32, the highest closing level since Aug. 19, while the broader Topix index of all First Section issues on the Tokyo Stock Exchange was up 15.01 points, or 1.82 percent, to 838.71.

Advances were led by exporters with Kyocera Corp. leaping 3.9 percent to 7,770 yen and TDK Corp. climbing 3.1 percent to 4,785 yen. Tokyo Electron Ltd. added 3.9 percent at 4,160 yen and Pioneer Corp. surged 5.2 percent to 264 yen.

Elpida Memory Inc. soared 9.5 percent to 1,039 yen, the biggest gain since August 2009. The world's third- largest maker of computer-memory chips was rated "strong outperform" in new coverage by Mitsubishi UFJ Morgan Stanley Securities Co.

NEC Corp. rose 3.2 percent to 224 yen. The electronics manufacturer has developed recognition technology that can reliably determine the gender and approximate age of anyone looking at an advertising display, the Wall Street Journal reported.

Threatening to derail the market's recent progress, however, is political uncertainty regarding the race for the Democratic Party of Japan's Presidential post, being hotly contested by Prime Minister Naoto Kan and former DPJ No. 2 Ichiro Ozawa.

Fitch Ratings said today that the political uncertainty risks hampering Japan's efforts to rein in its massive debt -- the largest in the industrialized world.

Concern that Ozawa will win the race and boost public spending sent bonds tumbling last week, with benchmark securities posting the biggest weekly decline since April 2008, analysts highlighted.

Currently, Fitch rates Japan's debt at AA-, the fourth highest grade.

Some 1.48 billion shares changed hands on the Tokyo Exchange's First Section, up from Friday's volume of 1.38 billion shares, with advancing issues outnumbering declining ones by 1,460 to 116.