* Nikkei hits new 8-mth high on U.S. stocks gain, weak yen
* Banks higher on foreign buying
* Foreign investors adding Japan stocks to portfolios
By Ayai Tomisawa
TOKYO, Jan 12 (Reuters) - The Nikkei average rose to a fresh eight-month high on Wednesday, with some upbeat U.S. earnings reports and a weaker yen providing momentum for investors to continue to add Japanese stocks to their portfolios.
Earnings reports from U.S. companies, including homebuilder Lennar and store chain Sears Holdings, were robust with Lennar reporting higher-than-expected earnings and Sears lifting its profit outlook above estimates.
After lagging other indices for most of 2010, the Nikkei benchmark has had a strong run since November and data last week showed foreign investors were net buyers of Japanese stocks in the week to Jan. 1 for a ninth straight week.
"Foreign investors have been reducing their underweight positions to neutral (on Japanese stocks), and they are gradually becoming overweight on certain sectors," such as automakers and some machinery stocks, said Mattia Ciancaleoni, director of equity sales at Citigroup Global Markets Japan.
Financial shares were higher on foreign buying, market participants said, while trading houses climbed after rallies in oil, gold and other commodities prices.
"Now that Resona's share issuance is out and the impact has been priced in, investors are buying back heavily-shorted banking shares," said a trader who asked not to be quoted by name.
Resona Holdings said on Friday that it would go ahead with a share offering to raise about $8 billion, taking advantage of the recently buoyant stock market to make progress on its repayment of government bailout funds.
At the midday break, the benchmark Nikkei was up 0.5 percent or 52.65 points in active trade at 10,563.33, its highest intraday level since May 13, 2010.
The Nikkei has gained 15 percent from the beginning of November, while the Dow Jones Industrial Average has added 5 percent and the FTSE has risen 5.6 percent over the same period.
The broader Topix added 0.7 percent to 933.81.
Among banks, Mizuho Financial Group rose 3.1 percent to 168 yen and Mitsubishi UFJ Financial Group added 3.4 percent to 457 yen. Among trading houses, Mitsubishi Corp rose 0.8 percent to 2,401 yen.
The weaker yen helped exporters outperform, with Toyota Motor Corp gaining 2 percent to 3,525 yen and Honda Motor Corp rising 1.2 percent to 3,305 yen.
The dollar has gained 0.7 percent to 83.1 yen and the euro has risen about one percent to around 108.3 yen in the last 24 hours.
Toshiba Corp gained 1 percent to 485 yen in heavy trade after Citigroup Global Markets Japan reiterated its "buy" rating and hiked the electronics maker's target share price to 670 yen from 600 yen, citing strong earning prospects in nuclear power.
Trade was active with around 1.3 billion shares changing hands on the Tokyo Stock Exchange's first section by midday, with the day's total likely to come in well above last week's average volume of 2.0 billion shares. (Editing by Edwina Gibbs)