Japan's Nikkei jumps 3.4 pct as Bear panic recedes

(Updates to midmorning)

TOKYO, March 19 (Reuters) - Japan's Nikkei share average jumped 3.4 percent on Wednesday, tracking steep gains on Wall Street after solid results from two top investment banks soothed investors spooked by Bear Stearns' sudden downfall.

An overnight gain by the dollar also helped exporters, with digital camera maker Canon Inc (7751.T) rising more than 6 percent and Honda Motor Co Ltd (7267.T) up nearly 6 percent.

Still, gains are seen likely to be limited ahead of a national holiday on Thursday, when Tokyo markets will be closed but turmoil in the global credit market is seen far from over.

"The biggest reason for Wall Street's gain is Lehman's earnings. The market has been in fear about who's going to be next after Bear Stearns," said Kenichi Hirano, operating officer at Tachibana Securities.

Goldman Sachs (GS.N) and Lehman Brothers LEH.N posted lower quarterly earnings on Tuesday, but both topped forecasts, reassuring investors that bank profits were intact despite the escalating credit crisis.

But Hirano said a sustained rally was unlikely, with investors also holding off ahead of the holiday. "The overall trend has not changed. It's not as if U.S. housing prices have started heading upward or consumer spending is picking up," he said.

As of 0046 GMT, the benchmark Nikkei .N225 was up 404.60 points at 12,368.76 and the broader TOPIX was up 3.6 percent at 1,205.68.

Canon rose 6.5 percent to 4,580 yen, the biggest contributor to the Nikkei, and Honda gained 5.5 percent to 2,775 yen.

Other exporters also made sharp gain, with Toyota Motor Corp (7203.T) up 4.3 percent at 5,100 yen and Sony Corp (6758.T) up 6.8 percent at 4,240 yen.

The dollar fell more than 1 yen from the day's high on Wednesday at one time, but was well off the 95.77 yen hit earlier this week, its lowest in nearly 13 years. It was trading at 99.72 yen JPY=.

The Federal Reserve on Tuesday cut the benchmark U.S. interest rate by 75 basis points to 2.25 percent. The cut was smaller than expected by some in the market.

Bank shares shot up, with Japan's No.1 Mitsubishi UFJ Financial Group (8306.T) up 5.3 percent at 852 yen. (Reporting by Taiga Uranaka, Editing by Michael Watson)