* Financial shares lead gains after MUFG’s strong earnings * Oil, trading companies gain on rebound in oil prices * Optimism on Greece underpins sentiment By Hideyuki Sano TOKYO, Feb 4 (Reuters) – Japanese shares rose on Wednesday as banks outperformed on strong earnings from Mitsubishi UFJ Financial Group while hopes for a new Greek debt swap deal and a further recovery in oil prices underpinned the overall mood.

The Nikkei share average rose 2.0 percent to 17,677.73, extending its recovery from Tuesday’s one week low of 17,271.87.

Financial shares led the gains after Mitsubishi UFJ Financial Group posted better than expected profits in the three months to December.

Mitsubishi UFJ rose 5.2 percent while rival SMFG gained 2.7 percent. The Tokyo Stock Exchange’s banking shares subindex rose 3.6 percent.

“Big profits at banks are boosting expectations that banks will lift shareholder returns,” said Toshiyuki Kanayama, market analyst at Monex Securities.

Although a sudden jump in Japanese bond yields triggered some selling in domestic shares on Tuesday, higher long-term bond yields are also seen boosting the revenue of lenders in the longer run.

That scenario benefits insurers, which invest a big part of their portfolio in domestic bonds. The TSE’s insurance companies subindex rose 3.6 percent, with Dai-ichi Life up 4.8 percent.

The market was also helped by a positive tone in global share markets after a new Greek government appeared to soften its stance on a debt writedown and as oil prices extended their recovery from six-year lows.

As Brent crude rose 16 percent in the past three sessions, investors also bought back shares that had been hit by falling energy prices, such as oil companies and trading houses.

Energy developer Inpex gained 4.1 percent while Mitsubishi Corp, which is due to announce its earnings later in the day, gained 4.1 percent.

Elsewhere Terumo jumped 4.3 percent, hitting a six-year high after the medical equipment maker posted upbeat earnings and announced share buybacks.

Bucking the trend, Gungho Online Entertainment fell after the online game developer reported slower sales in October-December.

Japanese earning announcements are in full swing, with companies including Toyota Motor, Fuji Heavy Industries and Hitachi due to report their Oct-Dec earnings.

The broader Topix rose 2.1 percent while the JPX-Nikkei Index 400 also gained 2.1 percent.

The market showed muted response to media reports that the Japanese government is likely to name academic Yutaka Harada, a proponent of aggressive steps to end deflation, to the central bank’s policy board.

(Editing by Shri Navaratnam)