TOKYO -- Tomorrow's headlines in some of Japan's racier newspapers could well read: "Merger Mania Monday Lifts Old Economy Stocks in Tech Issue Massacre."

A reshuffling in the paper and pulp industry, as well as the much-rumored foreign buyout of one of Japan's auto giants, lifted sentiment at the expense of tech and telecom stocks. Many investors were hesitant to build a lot of new positions since today marks the last day traded securities will be accounted in the books of fiscal 1999, which ends on Friday.

The

Nikkei 225

index rose 322.95 points, or 1.6%, to 20,281.03, while the

Topix

index, which includes all shares listed on the

Tokyo Stock Exchange's

first section, climbed 13.23 to 1653.83. The

Jasdaq

small-cap index lost 6.08, or 5.6%, to 103.43, while Nikkei

over-the-counter

shares shed 97.73, or 4.3%, to 2184.40.

DaimlerChrysler

(DCX)

said it has signed a letter of intent to take a 34% stake in

Mitsubishi Motors

for $1.95 billion, giving the German-U.S. auto giant potential veto power on Mitsubishi's board. The merger would create the world's third largest auto group behind

General Motors

(GM) - Get Report

and

Ford

(F) - Get Report

. Mitsubishi soared 51 yen, or 12.2%, to 470.

Nippon Paper Industries

and

Daishowa Paper Manufacturing

decided they would join hands, bringing cheers to investors as Old Japan continues to consolidate and get rid of excess capacity. Nippon Paper climbed 100, or 14.8%, to 774, while Daishowa rose 49, or 9.4%, to 572.

NTT DoCoMo

shed 140,000, or 3.4%, to 4.04 million after the

Nihon Keizai Shimbun

said it would take a stake in

Sakura Bank's

(SAKUY)

Internet banking venture. Sakura fell 10, or 1.4%, to 690.

Softbank

lost 5500, or 6.3%, to 81,500. The firm, which saw shares drop nearly 13% on Friday after announcing a new issue of shares, reportedly has decided either to delay or drop its offering altogether, due to the poor reception on the market.

OTC shares continued to see vast selling across the board, with

Trend Micro

(TMIC)

shedding 2000, or 10.6%, to 16,900 and

Yahoo! Japan

slipping 7 million, or 5.5%, to 120.4 million.

Traders said they are expecting a very quiet week ahead, as fiscal 1999 finally comes to a close. With approximately 58 trillion yen ($547 billion) worth of 10-year postal deposit savings maturing between April 1 and March 31, 2001, many observers are hoping some of that money will flow into equity mutual funds starting this month. Market action may also heat up after the April 3 release of the

Bank of Japan's

tankan survey of business sentiment, which analysts expect will show a slightly more optimistic attitude on the economy than did the previous survey.

The greenback stood at 106.83 versus the yen in listless trading.

A short-covering spree in March index futures helped a rally in blue-chips and drove Hong Kong's

Hang Seng

index up 508.29, or 2.9%, to 18,292.86.

HSBC

(HBC)

rose HK$2.50, or 2.7%, to 94.50, while

Wharf

climbed 1.05, or 7.4%, to 15.30.

With cross-strait tensions easing for the time being, investors in Taiwan were snapping up tech shares as if last week's jitters over relations with China had never happened. The

TWSE

index shot up 324.93, or 3.4%, to 9801.57.