(Updates with closing prices)

By Rocky Swift

TOKYO, July 14 (Reuters) - Japan's Nikkei share average

rallied on Tuesday, supported by bargain-buying and a tailwind

from the tech-heavy South Korean market.

The benchmark Nikkei 225 rose 0.74% to close at

67,743.50, reversing an earlier slide of as much as 1.45%. The

broader Topix gained 0.79% to 4,038.98.

Shares were broadly lower in the morning, taking cues from a

decline in the U.S. market overnight after renewed U.S.-Iran

hostilities caused a sharp rise in oil prices.

The Nikkei turned higher in the afternoon along with a

recovery in South Korea's Kospi, as correlation between

the markets has strengthened recently.

"We are seeing some buying on the dip," said Maki Sawada, an

equities strategist at Nomura Securities.

Central bank policy remained in focus after Reserve Bank of

New Zealand Chief Economist Paul Conway warned that higher oil

costs risk making inflation more persistent, reinforcing signals

of further tightening across major economies.

Mitsubishi UFJ Financial Group ( MUFG ), Japan's largest

banking group, advanced 1.67% to an all-time high, making it the

biggest company in the domestic market in term of market

value.

"As interest rates rise, there are expectations that bank

net interest margins will improve to some extent, leading to

gains in the banking sector," Nomura's Sawada said.

Market breadth was overwhelmingly positive, with 176

advancers on the Nikkei against 47 decliners and two unchanged.

The largest gainers were Shiseido ( SSDOF ), up 5.11%,

followed by Kawasaki Kisen Kaisha ( KAKKF ), 4.73% higher, and

Tokuyama ( TKYMF ), which gained 4.17%.

The largest losers were Yaskawa Electric ( YASKF ), down

8.98%, followed by Panasonic Holdings ( PCRFF ), 5.57% lower, and

Toppan Holdings ( TONPF ), which lost 4.64%.

(Reporting by Rocky Swift in Tokyo; Editing by Subhranshu Sahu)