(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.