* Nikkei up 1.7 pct, hits over one-week high at one stage
* Canon jumps despite quarterly loss, Sony up before results
* Optimism about U.S. "bad bank" helps financial shares
(Adds stocks, details)
By Aiko Hayashi
TOKYO, Jan 29 (Reuters) - Japan's Nikkei average climbed 1.7
percent on Thursday, boosted by exporters such as Honda Motor
<7267.T> on a softer yen, while financial shares jumped amid
optimism about the U.S. government's rescue plan for banks.
The market has largely factored in dismal corporate earnings
and Canon Inc <7751.T> surged despite reporting a plunge in
quarterly profit. Sony Corp <6758.T>, which has warned of a
massive loss and is set announce results after the close, gained
nearly 4 percent.
"If companies are just reporting a decline in profit, that
doesn't bother investors so much but they tend to punish
companies that tumble into the red," said Tsuyoshi Segawa, an
equity strategist at Shinko Securities.
"There's also a sense of relief so far as they had expected
far worse figures from exporters," he said.
Market players also said hopes for the establishment of a
'bad bank' in the United States, that would let U.S. financial
institutions move toxic assets off their books were supporting
sentiment. []
Japanese banks will benefit indirectly as the scheme could
help them to secure dollars, Segawa said.
Sumitomo Mitsui Financial Group <8316.T> soared 14.9 percent
to 3,860 yen. Japan's third-ranked bank said third-quarter net
profit fell 99 percent, hit by a weak economy and losses on it
stock portfolio. It stuck to its full-year forecast.
[]
"It seems the stock jumped on short covering by funds. In
theory, it was also a reaction after its earnings report as bad
news seem to have been exhausted for now," said Kenichi Hirano,
operating officer at Tachibana Securities.
The benchmark Nikkei <> added 134.28 points to 8,240.57,
after rising as high as 8305.38, its highest point in over a week
at one stage.
The broader Topix <> gained 1.6 percent to 816.84.
But some remained cautious about further advances.
"After gains on hopes for the 'bad bank,' the market could
start seeing selling pressure again as it's doubtful that the
scheme alone will be able to solve the financial problems," said
Hirano.
CANON, EXPORTERS GAIN
Honda jumped 4.6 percent to 2,295 yen, while bigger rival
Toyota Motor Corp <7203.T> added 2.7 percent to 3,060 yen.
The dollar rose 0.4 percent from late U.S. trading on
Wednesday to 90.64 yen <JPY=>, pulling away from a 13-
