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Nikkei rises as strong yen trend pauses; geopolitical tensions cap upside

* Geopolitical tensions still in focus, strong yen trend pauses * Market's attention on April-June earnings which kick off this week By Ayai Tomisawa TOKYO, July 22 (Reuters) - Japan's Nikkei share average rose on Tuesday morning after the three-day weekend, with exporters pulling ahead as the strong yen trend paused although geopolitical concerns checked the upside.

In the Gaza Strip, Israeli jets, tanks and artillery continued to pound Gaza as the death toll from a two-week conflict topped 500.

Malaysia has reached an agreement with the leader of the separatist group to retrieve the bodies of the victims from last week's downing of a Malaysia Airlines passenger jet as well as the plane's two black boxes, Malaysian Prime Minister Najib Razak said on Tuesday.

The Nikkei gained 0.7 percent to 15,314.20 in mid-morning trade as investors returned after Monday's holiday. The index fell 1.0 percent to its lowest closing level since July 11 on Friday as investors fled riskier assets on news the Malaysian Airlines passenger jet was shot down near the Ukraine-Russia border.

A pause in the yen's uptrend and gains in U.S. futures encouraged buyers in Tokyo. However, developments in Russia and Ukraine remain a focus for investors, market players said.

"Investor sentiment has settled as the VIX has stayed calm and there is few sign that the yen will spike for the time being," said Akio Yoshino, chief economist at equity research and strategy department at Amundi Japan.

"How Western countries will take action against Russia, and how Russia will respond to that is in focus." The CBOE Volatility Index, which is often referred to as 'the fear gauge', jumped 32.2 percent on Friday in Asia, the biggest percentage rise since April 2013.

The dollar crept up 0.1 percent to 101.48 yen, having pulled back from a low of 101.09 hit late last week.

Exporters rose, with Honda Motor Co adding 0.8 percent, Panasonic Corp up 1.8 percent and Sony Corp advancing 0.4 percent.

JFE Holdings outperformed the market, jumping 2.2 percent after the Nikkei business daily quoted President Hisanori Kanou as saying that the steelmaker plans to double production capacity at its Myanmar steel structure site in fiscal 2015.

Amundi's Yoshino said that investors will be keeping a close eye on corporate earnings for April-June this week, which is expected to confirm that a majority of companies have weathered the impact of a national sales tax rise in April.

He expects the Nikkei to trade between 14,800-15,700 over the next month.

The broader Topix gained 0.6 percent to 1,270.27, while the JPX-Nikkei Index 400 advanced 0.5 percent to 11,564.94.

(Editing by Shri Navaratnam)