Nikkei up 1.8 pct buoyed by banks, exporters

*Nikkei rises 1.8 percent, Topix gains 2.1 percent

*Exporters benefit from a softer yen

*Investors pick up banks after a recent sell-off (Adds stocks, details)

By Aiko Hayashi

TOKYO, Aug 18 (Reuters) - The Nikkei average rose 1.8 percent on Monday as a softer yen buoyed exporters, while bank shares such as top lender Mitsubishi UFJ Financial Group (8306.T) climbed as investors picked them up after a recent sell-off.

Construction machinery maker Komatsu Ltd (6301.T) jumped nearly 5 percent after Nikko Citi raised its rating to "buy/high risk" from "hold/high risk," saying resource-rich countries were expected to continue to drive earnings in the face of mounting risk from a global slowdown.

"Stocks are up on short-covering. Investors moved to pick up stocks as the Nikkei average got closer to a recent trough at the 12,900 level," said Yutaka Miura, deputy manager of the equity information department at Shinko Securities.

The benchmark Nikkei .N225 added 231.06 points to 13,250.47 by the end of morning trade, after losing 1.1 percent last week.

The broader Topix climbed 2.1 percent to 1,273.68.

The dollar rose to its highest level against the yen since early January on Friday, hitting 110.67 yen JPY=. It was down 0.2 percent to 110.26 yen on Monday.

Still, Takahiko Murai, general manager of equities at Nozomi Securities, said fears about a global economic slowdown are bound to hurt Japan's exporters.

"The global economy is generally headed downward... U.S. domestic consumption is slowing, and that means Japan's exports to the country are on the decline," he said.

Investors are also watching a monetary policy meeting by the Bank of Japan that starts on Monday and ends on Tuesday.

The central bank is expected to downgrade its view of the economy in a signal that crumbling export markets can no longer offer factories enough business to keep Japan out of recession. [ID:nT123416]

EXPORTERS, BANKS GAIN

Sony Corp (6758.T) rose 2.8 percent to 4,360 yen and electronics parts maker Kyocera Corp (6971.T) added 2.6 percent to 9,660 yen.