(Corrects one word in the quote in 5th paragraph)
* Shin-Etsu Chemical soars on strong results
* Exporters gain ground on weakened yen
By Ayai Tomisawa
TOKYO, July 27 (Reuters) - Japan's Nikkei share average rose on Wednesday morning after the yen dropped on expectations of monetary easing by the Bank of Japan this week, encouraging investors to scoop up recently battered stocks.
The Nikkei rose 1.2 percent to 16,581.00 in midmorning trade.
The Nikkei newspaper reported that the government will likely inject 6 trillion yen ($57 billion) in direct fiscal outlays into the economy over the next few years under a planned stimulus package.
Although the figure was below expectations of 10 trillion yen amid fading hopes the BOJ would adopt "helicopter money", the market is expecting some form of easing to emerge from the central bank's policy meeting ending Friday, traders said.
"The street is all hot and sweaty for a dual bazooka to be launched on both fiscal and monetary nature," said Gavin Parry, managing director at Parry International Trading Ltd. "Even though there is low probability of cash drop or a citizen dividend or anything like that, I think it's still very much on the table."
Exporters gained ground after the dollar rose 0.4 percent to 105.06 yen, compared to Tuesday's low of 103.995 yen. Toyota Motor Corp rose 2.4 percent and Honda Motor Co gained 1.7 percent.
Outperforming the market was chemical company Shin-Etsu Chemical, which jumped 13 percent after reporting April-June net profit rose 20 percent to 45.3 billion yen and forecasting a 7.5 percent rise to 160 billion yen for the full year.
Some traders believe results from Japanese companies will be better than expected.
"Investors will take heart from companies' quarterly earnings if they surprise the market with not so bad results," said Shuji Hosoi, a senior strategist at Daiwa Securities.
He added that the market may be supported during the quarterly earnings season by hopes Japanese companies' fundamentals are stronger than anticipated.
Trading house Itochu Corp skidded after activist short-seller Glaucus Research Group released a report early on Wednesday criticising the Japanese company's accounting.
The broader Topix gained 0.8 percent to 1,317.14. and the JPX-Nikkei Index 400 added 0.8 percent to 11,843.06. ($1 = 105.1500 yen)