Japan's Nikkei touches near 3-week high on Wall Street gains, trading firms jump

(Adds comments, updates midday break levels)

TOKYO, March 18 (Reuters) - Japan's Nikkei share average rose more than 1% to hit a nearly three-week high on Tuesday, tracking Wall Street's overnight gains, with trading firms leading the gains.

The Nikkei index crossed 38,000 level for the first time since February 27, hitting 38,004.2 but ended the morning session at 37,943.23, up 1.43% from the previous session.

The broader Topix rose 1.44% to 2,787.78. "Investors were relieved to see some positive cues, such as Wall Street's gains and a rally of domestic trading houses, but the overall situation has not changed," said Yusuke Sakai, a senior trader at T&D Asset Management.

"The possible impact of the (U.S. President Donald Trump's) tariff policy weighs on the sentiment," Sakai said.

U.S. stocks gained for a second straight session on Monday, as investors sought bargains after Nasdaq's and the S&P 500's four-week tumble and assessed the latest economic data to gauge the impact of the Trump administration's policies.

In Japan, trading firms jumped after Warren Buffett's Berkshire Hathaway ( BRK/A ) raised its holdings in five Japanese trading houses.

Mitsui & Co ( MITSF ) jumped 4.32% and Mitsubishi Corp ( MSBHF ) climbed 4.27%.

Uniqlo-owner Fast Retailing ( FRCOF ) rose 1.54% and chip-testing equipment maker Advantest ( ADTTF ) jumped 3.18%.

The Nikkei struggled to stay above the 38,000 level because investors were not confident about the market outlook, said Shuutarou Yasuda, a market analyst at Tokai Tokyo Intelligence Laboratory.

"It's just that their worries about the U.S. tariff impact and the U.S. economic outlook were partially removed. They were not bullish about the market yet, which is why investors sold stocks as the Nikkei rose close to the 38,000 level," said Yasuda.

Defence-related shares, which had rallied on expectations for more defence spending, fell, with IHI and Mitsubishi Heavy Industries ( MHVYF ) slipping 3.72% and 2.2%, respectively.

(Reporting by Junko Fujita; Editing by Tom Hogue and Rashmi Aich)