(Updates with prices, details and adds comments)

By Junko Fujita

TOKYO, July 22 (Reuters) - Japan's Nikkei share average

edged higher on Tuesday, as investors returning from an extended

holiday weekend reacted positively to the outcome of the upper

house election, which aligned with market expectations.

The Nikkei was up 0.19% at 39,892.81 by the midday

break, after rising as much as 1.15% to cross the 40,000 level

earlier in the session.

The broader Topix rose 0.12% to 2,837.89.

Japan's ruling coalition lost control of the upper house in

an election on Sunday, further weakening Prime Minister Shigeru

Ishiba's grip on power even as he vowed to remain party leader.

The election was closely monitored as Ishiba's party also

lost control of the more powerful lower house in elections last

year and his Liberal Democratic Party was facing calls from

opposition parties pledging to cut taxes.

"Investors bought stocks as the election outcome was in line

with their expectations," said Takamasa Ikeda, senior portfolio

manager at GCI Asset Management.

"And they thought the election outcome would not have much

impact on Japan's policy framework immediately, as Ishiba said

he has no plans to expand his coalition."

SoftBank Group rose 2.72%, making it the largest

contributor to the Nikkei's gains. Heavyweight chip-testing

equipment maker Advantest ( ADTTF ) climbed 2.01%.

Another chip-related heavyweight Tokyo Electron ( TOELF )

reversed early gains to inch 0.13% lower.

"The market had not expected the Nikkei to rise that

early in the session," said Seiichi Suzuki, chief equity market

analyst at Tokai Tokyo Intelligence Laboratory.

"There was no reason for the market to be that bullish

about the outlook for the equities as concerns about fiscal

health still remain."

Of the more than 1,600 stocks trading on the Tokyo Stock

Exchange's prime market, 54% advanced, 40% declined, and 5%

traded flat.

Heavy machinery maker Mitsubishi Heavy Industries ( MHVYF )

jumped 5.5% to become the top percentage gainer in the Nikkei.

Drugmaker Chugai Pharmaceutical fell 1.93%,

becoming the biggest drag in the Nikkei.