* BOJ buys ETFs on Monday and Tuesday
* BOJ's ETF buying supports market but limits gains - analyst
* Automakers outperform market
* Shimamura tumbles on weak monthly sales
By Ayai Tomisawa
TOKYO, Aug 24 (Reuters) - Japan's Nikkei share average rose on Wednesday with a pause in the strong-yen trend lifting cyclical stocks, while hopes that the Bank of Japan would buy more exchange traded funds continued to support sentiment.
The Nikkei rose 0.5 percent to 16,578.75 in midmorning trade.
Exporters were steady, with Toyota Motor Corp adding 1.7 percent and Nissan Motor Co gaining 1.9 percent.
Financials were also in demand, with Nomura Holdings rising 1.5 percent, Daiwa Securities advancing 1.3 percent and Mizuho Financial Group adding 0.9 percent.
While the market welcomes BOJ's buying of exchange-traded funds, some analysts have expressed concerns that the upside could be limited in a market distorted by BOJ-buying.
On Monday and Tuesday, the BOJ bought 1.2 billion yen of exchange traded funds on each day focused on companies which support investment in physical and human capital. The central bank had bought 70.7 billion yen of ETFs on August 4 and 10, respectively.
"A level of more than 70 billion yen in buying can be as big as a launch of a mutual fund," said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities. "It's supporting the market, but the Nikkei could be trading 1,000-1,500 points lower than the current level when the currency market sees the 100-yen-per-dollar level."
Fujito said that in an ordinary market where the central bank is not directly buying stocks, the market is expected to rise after it hits bottom when bad news is priced in.
"But when the market does not fall when it's supposed to fall, the upside is also likely limited," Fujito said.
The Nikkei has underperformed global peers in 2016. While the Nikkei has shed 13 percent since the beginning of the year, the S&P 500 index has risen 7 percent although the FTSEurofirst 300 index has fallen 6 percent.
Underperforming the market was clothing store operator Shimamura Co Ltd, which fell as much as 14.4 percent after announcing on Tuesday that its existing store sales in August fell 5.5 percent on the year, citing a long rainy season weighing on sales.
The broader Topix gained 0.5 percent to 1,304.25 and the JPX-Nikkei Index 400 advanced 0.5 percent to 11,717.82.
Reporting by Ayai Tomisawa; Editing by Eric Meijer