Japan's Nikkei rises as market stabilises after sharp selloff

(Updates prices as of midday recess)

By Kevin Buckland

TOKYO, Dec 2 (Reuters) - Japan's Nikkei share average rose on Tuesday as the market found its feet after a sharp selloff in the previous session, when the central bank governor signalled an interest rate hike could come as early as this month.

The Nikkei gained 0.4% to 49,499.06 by the midday trading recess. It had tumbled 1.9% on Monday, breaking below the psychological barrier of 50,000.

The broader Topix climbed 0.2% to 3,346.34 following a 1.2% slide in the previous session.

Bank of Japan Governor Kazuo Ueda said in a speech on Monday that policymakers would consider the "pros and cons" of a December rate hike, sending the strongest signal yet of near-term policy tightening.

This marked a hawkish shift in tone by Ueda, who had generally been a voice of caution among the central bank's policy board members.

"Ueda's message changed, and that had a big impact on the stock market," said Kenji Abe, an equities strategist at Daiwa Securities.

However, even if a quarter-point hike comes at the December 18-19 meeting, the policy rate would still be accommodative, and coupled with improving corporate earnings, will continue to support the stock market, Abe said.

Daiwa expects the Nikkei to rise to 60,000 by the end of next year and the Topix to climb to 4,000.

On Tuesday, Fanuc (FANUF) was the Nikkei's best performer in terms of percentage gains, rising 7.4% after the robot maker announced a collaboration with Nvidia (NVDA) to promote so-called "physical AI", with artificial intelligence integrated into robots.

Uniqlo owner Fast Retailing (FRCOF) was the biggest gainer by index points due to its extremely heavy weighting. The stock's 1.4% increase contributed 78 points to the Nikkei's total 196-point rise.

The biggest drag on the Nikkei was startup investor SoftBank Group, which sank 2%.

Toyota Motor (TM) dropped 0.9% amid declines across automaker shares as a sharp appreciation in the yen overnight lowered the value of overseas revenues.

Of the Nikkei's 225 components, 111 rose versus 112 that fell, with two trading flat. (Reporting by Kevin Buckland; Editing by Christian Schmollinger and Subhranshu Sahu)