* Firm dollar against yen boosts shares
* North Korea missile launch sours mood
* Automakers, financials lead gains
* Trading volume light due to U.S. holiday
TOKYO, July 4 (Reuters) - Japan's Nikkei share average rose on Tuesday as upbeat U.S. data lifted the dollar against the yen, but geopolitical concerns soured sentiment after North Korea launched a missile.
North Korea launched the ballistic missile from its western region into the sea off its east coast, South Korea's military said, ahead of a summit of leaders from the Group of 20 countries in Germany later this week.
The missile flew for about 40 minutes and may have landed in Japan's Exclusive Economic Zone (EEZ), the Japanese government said, adding that it had strongly protested what was a clear violation of UN resolutions.
The Nikkei was up 0.3 percent at 20,120.98 by midmorning, trimming gains from an intraday high of 20,197.16.
"North Korea's missile launch gave investors a reason to stay on the sidelines," said Takuya Takahashi, a strategist at Daiwa Securities.
The weak yen, which can boost export earnings, would offer support through the day but gains are likely to be limited, he said.
Traders expected trading volumes to be subdued by the closure of U.S. markets on Tuesday for the Independence Day holiday.
The dollar held steady at 113.360 yen after reaching as high as 113.480 late on Monday, its strongest since mid-May. That rise came after a stronger-than-expected national factory activity index from the U.S. Institute for Supply Management (ISM).
Automakers were leading the gains, with the transport equipment sector rising 2.2 percent to be the best performer on the board.
Toyota Motor Corp increased 2.3 percent, Honda Motor Co rose 2.8 percent and Nissan Motor Co pushed up by 1.9 percent.
Financial companies, which include banks and insurers that invest in higher-yielding products such as foreign bonds, were also in demand after U.S. Treasury yields rose overnight.
Mitsubishi UFJ Financial Group gained 1.2 percent, Mizuho Financial Group added 0.8 percent and T&D Holdings firmed 1.4 percent.
The broader Topix added 0.3 percent to 1,618.86 and the JPX-Nikkei Index 400 advanced 0.4 percent to 14,432.09. (Reporting by Ayai Tomisawa; Editing by Neil Fullick)