TOKYO, March 15 (Reuters) - Japanese bank stocks rebounded sharply on Wednesday, lifting the Nikkei share average toward its first gain in four days, with markets recovering some composure as worries eased over contagion from the failure of Silicon Valley Bank.

The Tokyo Stock Exchange's banking index rebounded 3.9% as of the midday recess, led by regional lenders including Shimane Bank, which surged 9%.

The Nikkei rose 0.3% to 27,298.01, following a three-day decline of nearly 5%. However the rebound was fragile, with the index at dipping to slightly negative earlier.

The broader Topix, which is more influenced by bank shares, gained 0.9% to 1,965.60.

"For the time being, calm has returned to the market, but the SVB problem still needs to be monitored closely - that seems to be the feeling among investors," said Kazuo Kamitani, a strategist at Nomura Securities.

"Ultimately, the market is still cautious."

The TSE's banking index had plunged almost 16% over the previous three sessions. But it had started from an elevated position, touching a more than seven-year high on Thursday amid growing conviction that the Bank of Japan would soon let up on the yield curve controls that have crushed profits from lending.

The pricing out of an imminent hawkish policy shift, and the high exposure to foreign bonds that Japanese financial institutions share with SVB, catalyzed the drop.

Insurers, which sold off with the banks, jointly paced Wednesday's rally, also rising 3.9%.

Japanese officials reiterated assurances on the health of the financial sector, with Finance Minister Shunichi Suzuki telling parliament that a similar crisis to SVB won't happen in the country.

Chip-testing equipment maker Advantest added 20.5 points to the Nikkei with a 2.7% gain, while chipmaking-equipment manufacturer Tokyo Electron contributed 13 points with a 0.8% advance.

Uniqlo store operator Fast Retailing was the biggest drag, erasing 37.5 index points with a 1.3% slide. Startup investor SoftBank Group fell 0.8%. (Reporting by Kevin Buckland; Editing by Rashmi Aich)