(Updates to midmorning)
TOKYO, Dec 9 (Reuters) - The Nikkei average rose 1.3 percent on Tuesday, buoyed by exporters such as Honda Motor Co on optimism for U.S. economic plans and a government bailout of the "Big Three" automakers.
Komatsu, the world's second-largest maker of earth-moving equipment, and other construction machinery shares extended Monday's gains on hopes for U.S. President-elect Barack Obama's infrastructure spending plan.
But data showing Japan's economy shrank more than initially estimated in the third quarter helped put a brake on further gains in the market, coupled with uncertainty over Obama's plans, said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC.
"Still, there's a sense of relief because the Big Three automakers will likely manage to survive. If they were to fail, that would have led to a further deterioration in the economy," he said.
"On the whole, we have optimism for now."
As of 0051 GMT, the benchmark Nikkei added 105.48 points to 8,434.53, after shooting up over 5 percent the previous day.
The broader Topix gained 1.5 percent to 824.20.
U.S. stocks rallied to their highest level in a month on Monday on optimism that Obama's proposed infrastructure spending could limit the depth of the recession and on hopes for the bailout of the three automakers -- GM, Ford and Chrysler.
Obama has started by asking his economic team to come up with a plan to create at least 2.5 million new jobs by 2011. Congress is also expected to pass a hefty new economic stimulus bill in January that could be ready for Obama's signature immediately after he is sworn in.
Meanwhile, the White House reviewed a Democratic plan on Monday to bail out stricken automakers with up to $15 billion in loans, a move that would also clear the way for longer-term help if industry meets certain conditions.
Shares of Honda jumped 3.8 percent to 1,802 yen and Toyota Motor Corp added 2.4 percent to 2,795 yen, while Sony Corp advanced 3.8 percent to 1,894 yen.
Komatsu climbed 5.8 percent to 1,065 yen and Kubota shot up 6.9 percent to 557 yen. Hitachi Construction surged 7.5 percent to 1,035 yen.
Construction companies powered gains on Wall Street on Monday, with Caterpillar surging almost 11 percent. (Reporting by Aiko Hayashi; Editing by Michael Watson)