* Japan Display jumps on capital injection news
* Bright China PMI offsets gloomy tankan
By Ayai Tomisawa
TOKYO, April 1 (Reuters) - Japan's Nikkei rose on the first day of the new fiscal year on Monday on U.S.-Sino trade talk hopes and as brisk Chinese manufacturing surveys lifted China-related stocks, which offset weak domestic corporate sentiment.
The Nikkei share average surged 2.1 percent to 21,655.51 in midmorning trade.
Japanese business confidence worsened to a two-year low in the March quarter, the Bank of Japan's "tankan" survey showed on Monday, underscoring concerns that Sino-U.S. trade tensions and softening global demand were taking a toll on the export-reliant economy.
However, the market brushed off these concerns and took heart from news that the United States and China made progress in trade talks that concluded on Friday in Beijing.
Investors' risk appetite also returned after a private business survey showed that China's manufacturing sector unexpectedly returned to growth for the first time in four months in March.
"China's PMI indicates that China's economic slowdown might have hit the bottom," said Yoshinori Shigemi, a global market strategist at JPMorgan Asset Management, adding that the gloomy Japanese "tankan" was mostly expected, so market participants are looking ahead and taking heart from the China's PMI survey.
Companies with large exposure to the Chinese market gained ground. Yaskawa Electric jumped 7.6 percent, Fanuc Corp soared 3.9 percent and Komatsu Ltd surged 3.7 percent.
Japan Display Inc was in the spotlight, rising 11 percent after the company confirmed a weekend media report that it is in talks with external parties in cooperation with top shareholder INCJ.
Daiichi Sankyo Co extended its gains and soared 10 percent on its cancer drug partnership with AstraZeneca Plc . AstraZeneca will pay up to $6.9 billion to work with Daiichi Sankyo on a hotly-tipped experimental treatment for breast cancer.
The broader Topix gained 2 percent to 1,622.74. (Editing by Sam Holmes)