TOKYO (Reuters) - Japanese stocks rebounded sharply in early trade on Tuesday, after their biggest single day rout since the 1987 Black Monday sell-off in the previous session.

The Nikkei rallied 8.1% at 34,004.22 as of 0026 GMT, while the broader Topix was up 8.57%.

The Nikkei plunged 12.4% on Monday in its worst performance since the October 1987 crash, as investors were shaken by last week's plunge in global stock markets, U.S. recession risks and worries investments funded by a cheap yen were being unwound.

Monday's collapse was a "reminder that it is next-to-impossible to diversify equity risk by region (or by sector or style) during major corrections or bear markets," said Stephen Dover, chief market strategist and head of Franklin Templeton Institute at Franklin Templeton.

"Opportunity will arise, but in our view, it is premature to step in at this point."