* Investors still cautious ahead of Fed outcome * Softbank soars after Dish abandons Sprint bid * Tepco tumbles as highly toxic substance found at plant By Ayai Tomisawa TOKYO, June 19 (Reuters) - Japan's Nikkei share average rose to a one-week high on Wednesday morning, underpinned by optimism that the U.S. Federal Reserve would temper worries about an imminent roll back of its stimulus programme. The market also got a boost from Softbank Corp, which soared after Dish Network Corp said it would abandon a bid for Sprint Nextel. Exporters rose as the dollar stayed above 95 yen, with Honda Motor Co adding 1.3 percent, Canon Inc advancing 1.7 percent and Toshiba Corp climbing 1.9 percent. Softbank, which is trying to buy U.S. wireless provider Sprint, soared 3.8 percent and was the third most traded stock by turnover after Dish Network said it would not make a new offer to buy Sprint and will instead focus on its tender offer for Clearwire Corp. The Nikkei rose 1.3 percent to 13,169.97 by the midday break after hitting a one-week high of 13,296.62 earlier. "Speculations about the Fed's decision are still keeping investors on the sidelines, so volume may be low. But Wall Street's optimistic stance on the Fed outcome is serving as a tailwind to Japanese stocks," said Yutaka Miura, a senior technical analyst at Mizuho Securities. Investors are looking to the Fed to clarify the outlook on its massive stimulus programme when it ends its two-day policy meeting on Wednesday. Global markets have been roiled since Fed Chairman Ben Bernanke suggested last month that the stimulus could be reduced in coming months if the economy continued to recover. While bargain hunting kept 29 of 33 Topix subsectors in positive territory, the utility sector dropped 1.2 percent and was the worst sectoral performer after Tokyo Electric Power Co nosedived 6.7 percent. The company said it had found high levels of toxic strontium in groundwater at the devastated nuclear plant in Fukushima. The Topix gained 1.2 percent to 1,098.88. With some technical signs showing that Japanese stocks are oversold, investors scooped up bargains. But market players said that investors may not want to take big positions until there is more clarity on the Fed's outlook for its stimulus. "It's merely a technical rebound," said Mitsushige Akino, chief fund manager at Ichiyoshi Asset Management. He said that with the market still vulnerable to selling, "most investors want to see the outcome before they take long positions." The Japanese market has seen extreme volatility accompanied by steep declines over the past few weeks as investors cut their long Japanese equities and short yen positions on worries of reduced stimulus from the Fed. Disappointment over an underwhelming package of structural reforms unveiled by the Japanese government recently and worries over slowing growth in China also contributed to the market tumult. The benchmark Nikkei, which slumped into bear market territory last week, has fallen 17 percent since reaching the mulityear high on May 23. It is still up 6.5 percent since April 4, when the Bank of Japan unveiled sweeping stimulus measures and has risen 27 percent this year.