(Update with closing prices)

TOKYO, March 18 (Reuters) - Japan's Nikkei share average

ended at a nearly three-week high on Tuesday, tracking Wall

Street's overnight gains, driven by trading firms.

The Nikkei index rose 1.2% to 37,845.42, its highest

close since February 27, in a third straight session of gains.

The broader Topix rose 1.29% to 2,783.56.

"Investors were relieved to see some positive cues, such as

Wall Street's gains and a rally of domestic trading houses, but

the overall situation has not changed," said Yusuke Sakai, a

senior trader at T&D Asset Management.

"The possible impact of the (U.S. President Donald

Trump's) tariff policy weighs on the sentiment," Sakai said.

U.S. stocks gained for a second straight session on Monday,

as investors sought bargains after Nasdaq's and the S&P 500's

four-week tumble and assessed the latest economic data to gauge

the impact of the Trump administration's policies.

In Japan, trading firms jumped after Warren Buffett's

Berkshire Hathaway ( BRK/A ) raised its holdings in five Japanese

trading houses.

Mitsui & Co ( MITSF ) rose 3.08% and Mitsubishi Corp ( MSBHF )

climbed 3.61%.

Uniqlo-owner Fast Retailing ( FRCOF ) rose 1.1% and

chip-testing equipment maker Advantest ( ADTTF ) jumped 2.76%.

Earlier in the day, the Nikkei crossed 38,000 level for the

first time since February 27, hitting 38,004.2 but failed to

keep that level throughout the day.

Investors were not confident about the market outlook, said

Shuutarou Yasuda, a market analyst at Tokai Tokyo Intelligence

Laboratory.

"It's just that their worries about the U.S. tariff impact

and the U.S. economic outlook were partially removed. They were

not bullish about the market yet, which is why investors sold

stocks as the Nikkei rose close to the 38,000 level," said

Yasuda.

Defence-related shares, which had rallied on expectations

for more defence spending, fell, with IHI and

Mitsubishi Heavy Industries ( MHVYF ) slipping 4.65% and 2.48%,

respectively.