* Nikkei trades 5 pct above 25-day moving average
* Sentiment to stay positive although market overbought - traders
* Pigeon soars after strong 9-month earnings expectations
By Ayai Tomisawa
TOKYO, Nov 19 (Reuters) - Japan's Nikkei share average rose on Thursday morning after Wall Street rallied, touching a fresh three-month high as the stronger dollar continued to support risk appetites and lifted all sectors.
The market awaited the outcome of a Bank of Japan policy meeting on Thursday that's expected to maintain the current pace of monetary easing.
The Nikkei rose 1.6 percent to 19,959.06 in midmorning trade, the highest level since Aug. 20.
Wall Street closed higher after the minutes of the U.S. Federal Reserve's October policy meeting signalled interest rates will rise very slowly after a start in December.
Traders said a positive mood is likely to stay in the Japanese market for the next few weeks, aided by coming events.
Expectations for more monetary stimulus from the European Central Bank next month have led some investors to take on more risk, they added.
Sentiment has stayed positive as the weaker yen generally serves as a tailwind for Japanese manufacturers' earnings when their profits abroad are repatriated. But given fast-paced rises in the market, a correction could hit, they said.
"The market may stay high as there are few catalysts to trigger selling, but in the short-term, the market is overbought," said Katsuhiko Nakamura, senior technical analyst at Mizuho Securities.
The Nikkei is trading about 5 percent above its 25-day moving average of 19,043.76, which is considered overbought.
Exporters gained ground on Thursday, with Advantest Corp rising 4.8 percent, Honda Motor Co 2.4 percent and Panasonic Corp 1.4 percent.
Financials were higher. Mitsubishi UFJ Financial Group rose 1.4 percent, Sumitomo Mitsui Financial Group added 1.6 percent and Nomura Holdings advanced 2.1 percent.
Pigeon Corp jumped 5.2 percent after the Nikkei business daily reported that it likely generated a record-high operating profit of about 11.5 billion yen for the nine months ended October, a 18 percent rise on the year.
The broader Topix gained 1.4 percent to 1,608.51 and the JPX-Nikkei Index 400 added 1.5 percent to 14,511.88. (Editing by Richard Borsuk)