* Slightly stronger yen limits gains
* Bank shares rise on U.S. deregulation moves
* Auto sector in spotlight, Toyota, Suzuki release earnings later
By Ayai Tomisawa
TOKYO, Feb 6 (Reuters) - Japan's Nikkei share average rose on Monday morning as bank stocks soared following moves by U.S. President Donald Trump to reduce regulation in the financial sector, but a slightly stronger yen kept gains limited.
The Nikkei rose 0.2 percent to 18,956.45 in mid-morning trade.
Traders said that most investors are expected to stay on the sidelines before Japanese Prime Minister Shinzo Abe meets U.S. President Donald Trump on Feb. 10 and 11, with trade and currencies likely to be on the agenda.
The Nikkei was not straying far from the 19,000-line, with investors cautious over Trump's policies. Last week, stocks tumbled after Trump signed an executive order restricting travel for individuals from seven Muslim-majority countries.
On Monday, the banking sector rose after he signed executive actions directing a review of the Dodd-Frank law. [ ]
"Trump's protectionist view and his other policies aimed at stoking U.S. growth are two sides on the same coin," said Hiroyuki Nakai, chief strategist at Tokai Tokyo Research Center. "People are currently focused on the negative side right now, but if his policy on tax cuts and fiscal stimulus get underway, people would realize that his policies could help mid-to-long term gains in the stock market."
Japanese banks which do business in the United States surged on deregulation hopes in the U.S. financial industry.
The banking sector rose 2.0 percent and was the second best performer on the board. Mitsubishi UFJ Financial Group surged 4.0 percent, while Sumitomo Mitsui Financial Group gained 1.3 percent.
Japan's auto sector was under the spotlight as well.
Honda Motor Co advanced 3 percent after it raised its annual net profit forecast for the second time.
Takata Corp was untraded with a glut of sell orders after sources said it had selected Key Safety Systems (KSS) as the final bidder for its restructuring, raising a concern that the U.S. auto parts supplier could lead Takata into a bankruptcy.
Meanwhile, Toyota Motor Corp and Suzuki Motor Corp appeared poised to unveil a wide-ranging partnership on Monday that could include the development of new technologies and procurement. Toyota was up 0.1 percent, while Suzuki dropped 1.0 percent in mid-morning trade.
Both automakers are scheduled to release their third-quarter earnings after the market close.
The broader Topix gained 0.4 percent to 1,520.52 and the JPX-Nikkei Index 400 added 0.3 percent to 13,622.42. (Editing by Simon Cameron-Moore)