Japan's Nikkei bounces on PM Ishiba's dovish rate comments, weaker yen

(Updates with prices as of 0230 GMT)

By Brigid Riley

TOKYO, Oct 3 (Reuters) - Japan's Nikkei share average rebounded on Thursday, buoyed by a softer yen as Prime Minister Shigeru Ishiba's dovish comments reduced bets of further tightening in monetary policy.

The Nikkei had risen 2.2% to 38,655.03 by the midday break, while the broader Topix was up 1.4% at 2,690.18.

Ishiba said Japan is not in an environment for an additional rate increase, in an apparent effort to shake off his reputation as a monetary hawk, after a meeting with Bank of Japan Governor Kazuo Ueda on Wednesday.

The yen hovered around 146.95 per dollar on Thursday. It had scaled a high of 141.65 on Monday, as markets digested Ishiba's win in the ruling Liberal Democratic Party's leadership election on Friday.

The yen and Japanese stocks typically move in opposite directions, since a stronger domestic currency hurts exporters' competitiveness when repatriating revenue.

The Nikkei's gains slowed somewhat as the index neared the psychologically significant 39,000 level.

There's a growing focus on how the new administration's economic policies will shape up, said Maki Sawada, an equities strategist at Nomura Securities.

"With those factors somewhat uncertain, it could temporarily weigh on the stock market," although a weaker yen looks poised to support the market on Thursday, she said.

Ishiba had previously said he would beef up taxation on investment income and that there was room for corporate tax hikes. He has however begun to back-pedal on his focus on fiscal discipline.

Export-related shares gained on the back of a softer yen. Sony Group (SONY) rose 1.5% and automaker Toyota Motor (TM) gained 2.1%.

Big technology shares tracked their U.S. peers higher and added to the Nikkei's rally.

Chip-related shares Tokyo Electron (TOELF) and Advantest (ADTTF) climbed 3.3% and 4.1%, respectively, while AI-focused startup investor SoftBank Group rallied nearly 3%.

Nikkei heavyweight Fast Retailing (FRCOF) surged 3.5%, after the Uniqlo parent said domestic store sales rose in September.

(Reporting by Brigid Riley; Editing by Rashmi Aich and Subhranshu Sahu)