(Updates to midmorning)

TOKYO, July 17 (Reuters) - Japan's Nikkei average rose 1 percent on Thursday, led by exporters such as Canon Inc (7751.T: Quote, Profile, Research) on a rebound in the dollar versus the yen JPY=, while banks jumped after surprisingly strong results from a U.S. bank.

"With the subprime problems still out there, it does not mean a trend change, but we are seeing a short-term rebound led by recently battered banks and exporters," said Norio Shimura, deputy head of the equity department at Chuo Securities.

"Investors feel relatively comfortable buying exporters after seeing the dollar gaining ground back to around 105 yen after falling to the 103 yen level, and banks are being lifted by Wells Fargo," he said.

U.S. stocks rallied more than 2 percent on Wednesday, powered by the best day for banks for 16 years as unexpectedly strong results from Wells Fargo & Co allayed worry about a credit crisis spiralling out of control. [ID:nN16284000]

As of 0043 GMT, the benchmark Nikkei .N225 had risen 129.24 points to 12,890.04.

The broader Topix .TOPX gained 1.4 percent to 1,267.08.

Digital camera maker Canon rose 1.6 percent to 4,980 yen and Toyota Motor Corp (7203.T: Quote, Profile, Research), which fell to a nearly three-year low on Wednesday, gained 2.4 percent to 4,750 yen.

Among banks, which have been hit hard by deepening worry about the global credit crisis, Mitsubishi UFJ Financial (8306.T: Quote, Profile, Research) gained 4 percent to 964 yen and Mizuho Financial Group (8411.T: Quote, Profile, Research) climbed 4.6 percent to 544,000 yen. Nomura Holdings Inc (8604.T: Quote, Profile, Research), Japan's largest brokerage, jumped 5 percent to 1,531 yen.