(Updates at 0230 GMT)

TOKYO, Oct 1 (Reuters) - Japan's Nikkei share average

rose more than 1% on Tuesday, led by defence stocks as former

defence minister Shigeru Ishiba is set to become the country's

next prime minister.

The Nikkei had gained 1.47% to 38,476.33 by the

midday break after falling nearly 5% in the previous session.

The broader Topix rose 1.23% to 2,678.4.

Heavy machinery makers were the top three percentage gainers

on the Nikkei, with Kawasaki Heavy Industries ( KWHIF ) jumping

8.32%, while Mitsubishi Heavy Industries ( MHVYF ) and IHI

climbed 7.82% and 6.95%, respectively.

Ishiba is set to be voted in by parliament as Japan's next

prime minister later in the day and unveil his cabinet.

A close Ishiba ally, Takeshi Iwaya, a former defence chief,

will take over as foreign minister, while Gen Nakatani will

return to the defence ministry.

"The market expected those defence-related stocks would

benefit after seeing reports about key members of the new

cabinet," said Tomochika Kitaoka, chief equity strategist at

Nomura Securities.

Exporters also rose on the back of a weaker yen. The dollar

strengthened after Federal Reserve Chair Jerome Powell pushed

back overnight against bets on more supersized interest rate

cuts.

Toyota Motor ( TM ) climbed 0.9% and Honda Motor ( HMC )

gained 1.72%.

A softer yen tends to help exporter shares as it increases

the value of overseas profits in yen terms when firms repatriate

them to Japan.

"The Nikkei returned to where it was a week ago and it will

stay around this level for a while. But the Japanese equities

are lagging behind their global peers, so they could rise

further if there is a trigger," said Kitaoka.

Chip-related heavyweights rose, with Tokyo Electron ( TOELF )

and Advantest ( ADTTF ) gaining 3.01% and 2.11%, respectively.