* Nikkei rises for 7th week
* Topix volume highest in 5 weeks
* Subaru falls on news co fails to follow proper inspection
TOKYO, Oct 27 (Reuters) - Japan's Nikkei share average surged more than 1 percent to a fresh 21-year high on Friday, led by banking shares as U.S. yields remained high and by tech shares after their U.S. counterparts posted strong earnings.
The Nikkei rose 1.2 percent to 22,008.54 points, its strongest closing level since mid-1996. For the week, the index has risen 2.6 percent, posting seventh straight weeks of gains, the longest weekly winning streak in almost a year.
The broader Topix gained 1.0 percent to 1,771.05, with 2.0 billion shares changing hands, the highest level in five weeks.
It had risen for a record 16 straight sessions through Tuesday before dipping on Wednesday.
Shares in financial firms, which invest in high-yielding products such as foreign bonds, staged a rally, with Mitsubishi UFJ Financial Group surging 2.8 percent and Mizuho Financial Group soaring 1.9 percent.
Insurance stocks were in demand as well, with Dai-ichi Life Holdings rising 1.0 percent and Sompo Holdings adding 0.8 percent.
On Thursday, the 10-year U.S. Treasury note yield was at 2.453 percent, up from Wednesday's 2.444 percent. Ten-year yields hit a seven-month peak on Wednesday.
"Since global markets are resilient, foreign investors' risk appetite has been strong," said Mutsumi Kagawa, chief global strategist at Rakuten Securities. "The fact that the dollar is above 114 yen is also supporting the mood."
The dollar gained 0.2 percent to 114.20 yen.
Tech shares rose after Amazon.com Inc, Microsoft Corp, Alphabet Corps Google and Intel Corp posted stellar quarterly earnings on Thursday.
Advantest Corp jumped 6.5 percent, Sumco surged 3.9 percent, and NTT Data soared 2.8 percent.
However, Subaru Corp shed 2.6 percent after sources told Reuters that the automaker failed to follow proper inspection procedures for vehicles destined for the domestic market at a factory in Japan. (Reporting by Ayai Tomisawa; Editing by Sam Holmes)