* Nikkei extends gains, all week's losses erased
* Aozora Bank and Shinsei Bank climb on merger talks
* Mitsubishi Electric jumps on report of solar plans
TOKYO, June 25 (Reuters) - Japan's Nikkei average extended gains to over 2 percent on Thursday, with rises by exporters on a weaker yen and a rally in tech shares helping erase losses posted earlier in the week. Aozora Bank and Shinsei Bank soared on news they were in merger talks, while Tokyo Electron and other tech shares rose after their U.S. tech peers drew strength in the wake of stronger-than-expected quarterly results from software maker Oracle Corp.
Market analysts said investors had been cheered by a lack of surprises from the Federal Reserve's policy meeting and were engaged in both bargain-hunting and short-covering. "A lot of people have also taken heart from the fact that the Nikkei did not break below the 9,500 support level," said Fujio Ando, senior managing director at Chibagin Asset Management.
"What we're seeing this afternoon is a rush of people hurrying to buy at this level."
The Nikkei rose 2.4 percent or 233.53 points to 9,839.24, climbing well above its 25-day moving average, now around 9,700. The 25-day moving average is a closely watched technical level among Japanese equities traders, and had acted as support for the Nikkei over the course of its three-month rally since March, but became a resistance level after the average fell below it earlier this week.
Many analysts had said that if it broke below 9,500 the market was likely to quickly fall as far as 9,000, but that may have been averted for now.
The Federal Reserve kept interest rates at nearly zero as widely expected on Wednesday, and gave no hint on an imminent exit from bold policy easing.
Investors had been keenly awaiting the Fed's policy statement, nervous it could hint at interest rate hikes.
The yen fell as the market weighed up whether to resume rallies in riskier assets, with the dollar gaining 0.6 percent to 96.17 yen.
Exporters such as Honda Motor Co climbed as a result, with Honda gaining 3.5 percent to 2,655 yen and Toyota Motor Corp up 2.8 percent at 3,720 yen.
Canon Inc and Sony Corp benefited from that as well as from gains among tech shares in the United States, with Canon rising 2.5 percent to 3,280 yen and Sony up 2.8 percent at 2.535 yen.
Aozora Bank and Shinsei Bank, hurt by soured investments and exposure to subprime loans, said on Thursday they are in talks to merge, in a deal that would create Japan's sixth-largest bank.
Sources told Reuters in April the two were discussing a merger. Japanese media have since reported that negotiations may have been stalled by disagreements between the banks' major shareholders.
Aozora Bank climbed 8.6 percent to 152 yen and Shinsei Bank rose 8.3 percent to 158 yen.
Mitsubishi Electric Corp surged 7.2 percent after the Nikkei business daily said it plans to build plants in the United States and Europe to assemble solar power generation systems using solar panels shipped from Japan. (Reporting by Elaine Lies; Editing by Michael Watson)