By Aiko Hayashi

TOKYO (Reuters) - Japan's Nikkei stock average rose 0.2 percent to hit a two-month closing high on Monday, led higher by financial players such as top lender Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research), which jumped 10 percent on improving investor confidence in the sector.

Kyocera Corp (6971.T: Quote, Profile, Research) jumped 6 percent, becoming the biggest positive contributor to the Nikkei 225, after reporting better-than-expected earnings forecasts, while a softer yen benefited automakers such as Honda Motor Co Ltd (7267.T: Quote, Profile, Research).

"The U.S. financial sector, which had been calm, helped the market. But the Nikkei eased after topping 14,000 and ahead of a national holiday," said Kazuhiro Takahashi, general manager of the equity marketing department at Daiwa Securities SMBC.

"But the biggest factor is still the FOMC" policy-setting meeting at the Federal Reserve starting on Tuesday, he said.

UBS upgraded the global banking sector to "neutral", saying that with more than $191 billion (96.4 billion pounds) of capital raised, bank capitalisation was well under way.

"Investors want to see the outcome of the meeting as the market had already factored in the possibility that the Fed may stop cutting interest rates, prompting investors to return to financials," Takahashi said.

Japanese markets will be closed for a national holiday on Tuesday.

The Nikkei average .N225 added 30.90 points to 13,894.37, the highest close since February 28. The benchmark has added 2.9 percent in the past week, while it is down about 9 percent so far this year.