* Nikkei climbs 1 pct, Topix rises 0.8 pct
* Yen hits 7-mth low vs dollar on expectations of LDP election win
* Toyota, other exporters lead the charge higher
* Softbank gains after J.P. Morgan lifts price target
By Dominic Lau
TOKYO, Nov 21 (Reuters) - The Nikkei average rose to a two-month high on Wednesday, led by exporters after the yen hit a seven-month low versus the dollar on expectations the Bank of Japan will be pushed to take aggressive stimulus action under a likely new government.
Shinzo Abe, leader of the main opposition Liberal Democratic Party (LDP), has called for more extreme measures from the central bank, including setting a 2 percent inflation target, to pull the export-reliant economy out of deflation.
His comments ahead of a Dec. 16 national election have whipsawed the yen, which hit a seven-month low of 81.975 yen to the dollar on Wednesday. A softer Japanese currency inflates exporters' overseas earnings when repatriated and increases their sales competitiveness.
Exporter shares that benefited from the weaker yen included Toyota Motor Corp, Canon Inc, Honda Motor Co and Nissan Motor Co, which gained between 1.2 and 3 percent.
The Nikkei climbed 1 percent to 9,235.85 by the midday break after slipping 0.1 percent on Tuesday to snap a four-session winning run. The broader Topix advanced 0.8 percent to 768.02 in active trade, with volume at 59 percent of its full daily average for the past 90 trading days.
"What is driving the yen weaker is politics. Specifically, the LDP releasing their manifesto...and reiterating their pro-stance for monetary easing, their strong hand they will take with the BOJ," a senior dealer at a foreign brokerage said. "Every stock that is up today is a yen-sensitive stock.
"Nobody cares about last month's trade data...There is going to be policy in place to drive the yen weaker, which your trade data is going to improve. There is no point in backward looking," the dealer said.
Japan's exports slid 6.5 percent in October from a year earlier to mark the fifth consecutive month of declines, government data showed on Wednesday, weighed down by weakening global demand and a territorial dispute with China.
TOYOTA, SOFTBANK IN DEMAND
Toyota was the third-most traded stock on the main board by turnover, with Softbank Corp the most traded. Honda and Canon were the fourth and fifth-most traded, respectively.
Index heavyweight Softbank rose 2.3 percent to 2,983 yen after J.P. Morgan raised its price target on the mobile operator by 8.6 percent to 3,800 yen.
"The Japanese stock market is completely dependent on the Japanese yen...so it's very simple. Maybe foreign investors will rush into the Japanese stock market," said Yasuo Sakuma, portfolio manager at Bayview Asset Management.
"If you look at the trading volume last Friday and the last couple of days, not only short-covering but also the long-only, new money is entering the Japanese stock market."
Sakuma said he was tilting his portfolio towards exporters, such as auto parts makers, and camera and electronic device makers and cut his exposure in domestically-focused companies like retailers.
Auto and parts makers gained 2.7 percent as the best performing sector on Wednesday morning.
The benchmark Nikkei is up 9.2 percent this year, boosted by the 5.7 percent rally from Nov. 14 to 19. Still, the Japanese index lags a 10.4 percent rise in the U.S. S&P 500 and a 10.2 percent gain in the pan-European STOXX Europe 600.