*Nikkei rises as oil's fall to six-week low buoys carmakers

*Banks rise on U.S. financial rescue hopes, but pare gains

*Some plants halted after earthquake, but impact limited (Adds stocks, details)

By Elaine Lies

TOKYO, July 24 (Reuters) - Japan's Nikkei stock average climbed 1.3 percent on Thursday, in sight of its highest close since June, as Toyota Motor Co (7203.T: Quote, Profile, Research) and other carmakers led gains among exporters after oil prices fell to a six-week low and the yen weakened. Advantest Corp (6857.T: Quote, Profile, Research) and other chip equipment firms sold off earlier this week bounced back, while banks rose on relief for troubled home financers Fannie Mae (FNM.N: Quote, Profile, Research) and Freddie Mac (FRE.N: Quote, Profile, Research) after U.S. President George W. Bush dropped a threat to veto a housing rescue bill.

A strong earthquake in northern Japan early on Thursday led a handful of companies to halt production at plants in the affected area, but one -- Nippon Steel Corp's (5401.T: Quote, Profile, Research) Kamaishi Works -- had resumed by midday, and others were expected to restart soon.

Oil fell $4 on Wednesday, extending its losses to more than $20 from the all-time peak above $147 a barrel hit on July 11 and helping to buoy the dollar, which at one point on Thursday touched a one-month high against the yen.

"The fundamental issue is oil, and this is helping the market become cautiously optimistic," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

"There's a sense that investors still lack confidence, but the fall in oil has sparked some buying, and with banks likely having hit bottom, optimism may grow."