TOKYO, May 12 (Reuters) - Japan's Nikkei share average

rose on Monday as indications of progress in U.S.-China trade

talks boosted hopes of a deal between the major economies.

As of 0202 GMT, the Nikkei was up 0.2% at 37,573.27.

The broader Topix edged 0.02% higher at 2,734.09.

"Investors bought stocks on optimism that the trade talks

between the U.S. and China made progress," said Shuutarou

Yasuda, a market analyst at Tokai Tokyo Intelligence Laboratory.

"But gains were limited as they sold stocks on the rally.

Both the Nikkei and Topix rose sharply, but those rallies were

based just on expectations on the trade talk progress."

The Nikkei has risen about 20% from its close on April 7,

when the index fell to a 1-1/2-year low after the announcement

of U.S. sweeping tariffs.

The index traded more than 7% above the 25-day average on

Friday, an indication that the market was overheated, said Maki

Sawada, senior strategist at Nomura Securities.

The United States and China ended trade talks on a positive

note on Sunday, with U.S. officials touting a "deal" to reduce

the U.S. trade deficit, while Chinese officials said the sides

had reached "important consensus" and agreed to launch another

new economic dialogue forum.

Chip-testing equipment maker Advantest ( ADTTF ) jumped 4.3%

to provide the biggest boost to the Nikkei.

Property developer Tokyu Fudosan ( TTUUF ) rose 5.18% after

forecasting a record annual net profit of 85 billion yen ($582

million) for the year to March 2026.

Drug makers fell on concerns about falling drug prices after

U.S. President Donald Trump said he would sign an executive

order on reducing prescription drug and pharmaceutical prices.

Daiichi Sankyo ( DSKYF ) lost 5.44%. The pharmaceutical

sector fell 4.3% to become the worst performer among

the Tokyo Stock Exchange's 33 industry sub-indexes.

Nippon Steel ( NISTF ) fell 4.94% after the steel maker said

it expected net profit to slide 43% in the fiscal year ending

March 2026.

($1 = 146.1000 yen)