Japan Rally Helps Boost Dow Up 3.38 : Market: Tokyo surge raises hope earlier turmoil will have little ripple effect in world exchanges.

The stock market eked out a small gain today, helped by a rally in Japanese stock prices and a drop in domestic interest rates.

The Dow Jones average of 30 industrials, up about 20 points in the early going, settled for a 3.38 gain at 2,707.66.

Advancing issues outnumbered declines by about 5 to 4 on the New York Stock Exchange, with 829 up, 652 down and 487 unchanged.

Big Board volume totaled 116.11 million shares, down from 132.07 million in the previous session.

The NYSE’s composite index rose .17 to 185.62.

The recently battered Tokyo stock market began to rebound on Friday. Today it surged ahead nearly 5% for its second largest gain on record.

Analysts said that prompted hopes that turmoil in the Japanese markets might subside without having caused many ripple effects in other financial centers around the world.

At the same time, the dollar continued its recent climb against the Japanese yen in foreign exchange.

The U.S. bond market, which has benefited from the dollar’s strength, extended its recent rally today, pushing interest rates lower.

The U.S. Treasury’s key 30-year bond was up 11/32 point, or $3.40 per $1,000 in face value by midday EST. Its yield, which moves in the opposite direction from price, slipped to 8.44% from 8.47% late Friday.

Analysts said buying interest was sparked by the dollar’s persistent upward climb against the yen despite efforts by the Bank of Japan to stem the gains. A stronger dollar increases the value of dollar-denominated assets, such as bonds.

“Good dollar buying overseas pushed us up,” said Mitchell Held, chief financial economist for Smith Barney, Harris Upham & Co. “Other than that, it’s pretty quiet here.”

In overnight trading in Japan, the dollar closed at 156.40 yen, up 1.33 yen from last Friday’s close of 155.07 yen.

Credit market observers said the drop in precious metals prices also was helping bond prices. Investors in gold and other important metals generally sell when prices are declining and buy dollar-denominated securities.

In the secondary market for Treasury bonds, prices of short-term governments were up between 1/16 point and 1/8 point, intermediate maturities had gained between 3/16 point and 9/32 point and long-term issues had advanced between 3/8 point and 13/32 point, according to Telerate Inc., a financial information service.

The movement of a point equals a change of $10 in the price of a bond with a $1,000 face value.

The Shearson Lehman Hutton daily Treasury bond index, which measures price movements on all outstanding Treasury issues with maturities of a year or longer, was up 1.58 to 1,157.13.

Yields on three-month Treasury bills were down to 8.08% as the discount lost 3 basis points to 7.83%. Yields on six-month bills slipped to 8.23% as the discount fell 1 basis point to 7.81%. Yields on one-year bills fell to 8.25% as the discount declined 2 basis points to 7.68%.