* Nikkei rises 0.9 pct by midday
* Pierces crucial resistance levels
* Financial shares lead advance as foreigners buy back
* Long-term growth prospects eyed in earning announcements
By Antoni Slodkowski
TOKYO, Jan 25 (Reuters) - Japan's Nikkei stock average climbed for a second straight session on Tuesday, breaching two key resistance levels as it continued to regain some of the ground it lost last week.
Market participants said there was cautious optimism ahead of earnings from major domestic companies reporting this week but added it would be actual results and company guidance about long-term growth potential that would decide if the benchmark will make further substantial gains.
Financials, property and high-tech shares were among the biggest gainers, with foreign investors detected buying sectors that had fallen prey to profit-taking last week.
Canon Inc and Kyocera Corp as well as Japan's biggest personal computer firm, NEC Corp, will report this week, and could set the tone for the October-December earnings season that will last until early February.
Many analysts expect robust results based on the pickup in the global economy and demand in the United States as well as a dollar/yen rate that has been slightly stronger than many firms' estimates.
They also say that there will be more emphasis than usual on company comments about longer-term growth prospects.
"Stocks have risen a lot over the quarter and strong earnings are at least partly already priced in by investors, so they will not only want to see the figures for the quarter but also how those firms can sustain growth in the long run," said Masayoshi Okamoto, head of dealing at Jujiya Securities.
Brokers have listed cost control, structural changes, exposure to growing Asian markets and foreign currency hedging as focal points to watch.
By the midday break, the benchmark Nikkei had risen 0.9 percent or 97.50 points to 10,442.61.
It breached two crucial resistance levels, its closely-watched 25-day moving average, now standing at 10,403.61 and then 10,420, where December futures and option prices settled.
The broader Topix added 1.2 percent to 928.52.
Morning volume was steady with 1 billion shares changing hands on the Tokyo Stock Exchange's main board, suggesting volume for the full day will be slightly below last week's average of 2.15 billion shares.
FINANCIALS LEAD ADVANCE
Basket buying by foreigners pushed financial stocks higher, market participants said.
Banking sector added 2.1 percent led by Japan's biggest bank by assets, Mitsubishi UFJ Financial Group, which rose 3 percent to 454 yen, while Sumitomo Mitsui Financial Group added 2 percent to 2,952 yen. The banks were two most actively traded shares on the main board.
The banking sector has gained 23 percent since November, but is still considered undervalued as its price-to-book ratio stands at 0.7, underperforming the average PBR of 1.2 for the Nikkei 225 components. A share is seen as undervalued if the PBR is below 1.0.
Dividend yields at Japanese banks are also seen as more attractive than other Nikkei components, as they stand at 2.8 percent compared with the average for the Nikkei at 1.6 percent.
"This rise is connected to valuations, but a lot of that is simple buying back after those shares fell rapidly at the end of last week," said Mitsuo Shimizu, deputy general manager at Cosmo Securities.
But Resona Holdings fell 4.1 percent to 448 yen after it said it would raise a lower-than-expected $6.6 billion in its global share offering, in a sign investors are sceptical of the Japanese bank's growth prospects as it weans itself from government control.
TDK Corp rose 2.5 percent to 5,800 yen after the Nikkei business daily reported that it had developed a way to manufacture miniature modules for smartphones that pack features into a 30 percent smaller footprint than usual. (Additional reporting by Ayai Tomisawa; Editing by Edwina Gibbs)