TOKYO - Japanese shares rose on Monday, led by cyclical stocks that would benefit from an economic recovery from the COVID-19 lows, as the country plans to lift its emergency measures this week, though caution after a sharp rally this month capped gains.

The Nikkei share average was up 0.36% to 30,357.20 by 0208 GMT, while the broader Topix gained 0.39% to 2,098.94.

The Nikkei rose more than 8% this month on hopes for a new political leadership and recovery amid falling number of coronavirus infections.

"Japan's new phase of economy was factored in today's market. Shares that were related to an economic reopening were strong," said Kentaro Hayashi, senior strategist at Daiwa Securities.

"But overall, the market is going through a period of adjusting after a strong rally, which limited gains of those stocks."

Japan's health minister said that the nation's COVID-19 infection situation is improving such that emergency conditions could soon be lifted in most parts of the country.

The infectious Delta variant sparked a fifth wave of COVID-19 in Japan that drove infections to record levels last month. To prevent hospitals from being overwhelmed, the government extended emergency restrictions covering about 80% of the population until the end of September.

Airlines jumped 3.96% and railway operators rose 2.51%.

Department stores rose, with Takashimaya jumping 4.54%, Isetan Mitsukoshi 3099.T gaining 4.15% and Marui Group rising 4.37%.

Shares that benefited from "stay-at-home" lifestyle were subdued, with gamemaker Bandai Namco losing 1.51% and frozen food maker Ajinomoto falling 0.83%.

Stocks with an exposure to China continued to be hit, as fears of potential default of China Evergrande loomed, with air-conditioner maker Daikin Industries falling 3.12% and toilet maker Toto slipping 1.66%.

(Reporting by Junko Fujita; Editing by Rashmi Aich) ((813-4563-2711, junko.fujita@thomsonreuters.com, Reuters Messaging:junko.fujita.reuters.com@reuters.net;))