* Nikkei options and futures’ settlement on Friday in focus * Weaker yen lifts sentiment By Ayai Tomisawa TOKYO, March 10 (Reuters) – Japan’s Nikkei share average edged higher on Tuesday morning after U.S. shares rebounded on M&A activity and the yen weakened further against the dollar.

The Nikkei rose 0.4 percent to 18,860.25 in mid-morning trade, moving closer to a 15-year high of 18,979.64 hit last Friday.

Investors have, however, been cautious about chasing the market higher after a strong U.S. jobs report on Friday raised expectations that the U.S. Federal Reserve will hike interest rates as early as this summer.

Any move to exclude “patient” from the Fed’s statement after its March 17-18 policy meeting would be seen as paving the way for an early rate hike, market observers said.

“Investors may not make big bets until the next FOMC,” said Hiroyuki Nakai, chief strategist at Tokai Tokyo Research Center.

But he also said this Friday’s settlement price for Nikkei futures and options contracts expiring in March could also lift the market.

The closely watched settlement price, known in Japan as the special quotation, or “SQ”, is calculated from the opening prices of the 225 shares in the Nikkei average on the second Friday of the month.

“If the settlement price comes in above 19,000, investors may chase the market higher,” Nakai said. “The underlying mood is cautious, but the market can be volatile because of the SQ.” The dollar rose as high as 121.625 yen after bouncing from an overnight low of 120.615. A move above 121.86 would take the greenback to its highest since July 2007.

That helped lift exporters, with Honda Motor Co gaining 1.4 percent and Toyota Motor Corp rising 0.4 percent.

But electronics retailer Laox Co tumbled as much as 20 percent to 251 yen, its lowest since Jan. 29 after it said it will raise up to about 31 billion yen ($ 255 million) by issuing new shares.

The broader Topix added 0.4 percent to 1,538.38 and the JPX-Nikkei Index 400 advanced 0.4 percent to 13,981.25.

($ 1 = 121.7000 yen) (Editing by Edwina Gibbs)