TOKYO (Kyodo) -- Tokyo stocks ended higher Monday as financial issues gained on bets the Bank of Japan could hike interest rates soon, while the market was also boosted by hopes that Japan's Government Pension Investment Fund will increase its stockholdings.

The 225-issue Nikkei Stock Average ended up 304.99 points, or 0.80 percent, from Friday at 38,513.02. The broader Topix index finished 34.01 points, or 1.27 percent, higher at 2,714.72.

On the top-tier Prime Market, gainers were led by insurance, bank and nonferrous metal issues.

The U.S. dollar strengthened to briefly trade in the upper 150 yen range in Tokyo, as the U.S. currency was bought back after weakening to the mid-149 yen level on yen buying stirred by speculation the BOJ could raise rates at its policy meeting this month.

At 5 p.m., the dollar fetched 150.24-26 yen, compared with 149.68-78 yen in New York and 149.98-150.00 yen in Tokyo at 5 p.m. Friday.

The euro was quoted at $1.0501-0503 and 157.77-81 yen against $1.0571-0581 and 158.22-32 yen in New York and $1.0579-0580 and 158.67-71 yen in Tokyo late Friday afternoon.

The yield on the benchmark 10-year Japanese government bond ended at 1.075 percent, up 0.025 percentage point from Friday's close. It rose after Governor Kazuo Ueda said the time for a rate hike is "nearing" in an interview with the Nikkei business daily.

On the stock market, the Nikkei erased earlier losses, with banking and other financial issues gaining as Ueda's remarks raised prospects of a rate hike, which is expected to lift banks' lending rates.

Stocks were further supported by news the GPIF plans to raise the rate of its investment return target by 0.2 percentage point from the current level, fueling speculation that the fund will increase its holdings of stocks, analysts said.

The fund currently allocates its assets almost equally in Japanese stocks, bonds, foreign stocks and bonds.

"Market participants speculated the fund will slightly increase its weight in stocks, although the GPIF hasn't said anything," said Toshikazu Horiuchi, equity strategist at IwaiCosmo Securities Co.

Export-oriented auto issues also drew buying as the yen weakened, raising prospects of improved profits when repatriating overseas earnings.