Tokyo shares up 0.16pc in morning trade

The benchmark Nikkei index rose 14.97 points to 9,463.18 by noon. The Topix index of all issues on the first section of the Tokyo Stock Exchange was up 0.24 percent or 1.93 points to 814.19.

Tokyo Electric Power (TEPCO) climbed 18.59 percent to 236 yen, as investor sentiment brightened following a cabinet approval of a compensation scheme for the operator of the quake-hit nuclear plant.

Other utilities also posted gains. Chubu Electric soared 6.94 percent to 1,232 yen and Kansai Electric added 2.85 percent to 1,190 yen.

But gains in the overall market were limited ahead of the release of Chinese data showing inflation at a 34 month high and a policy announcement by the Japanese central bank, which investors would get their opportunity to react to in the afternoon session.

"There are worries about the global economic slowdown, Europe's debt problems and the prospects of a Chinese rate hike," Hiroichi Nishi, general manager at SMBC Nikko Securities, told Dow Jones Newswires.

Among Japanese firms with exposure to the Chinese market, construction machinery maker Komatsu lost 0.56 percent to 2,276 yen on caution before the release of China's consumer price index.

China's inflation rate announced during the lunch break hit its highest level since July 2008 as food prices soared following power shortages and crippling droughts in some regions.

The consumer price index rose 5.5 percent year-on-year in May, up from 5.3 percent in April and far above Beijing's annual target of 4.0 percent. The rise matched a median estimate of analysts polled by Dow Jones.

"Japan will not be unscathed if the economies of its two top export markets--the US and China--falter," said Masayoshi Yano, a senior market analyst at Meiwa Securities.

US stocks were mixed on Monday, with markets largely stable after a brutal sell-off last week driven by concerns about a slowing economic recovery.

Copyright AFP (Agence France-Presse), 2011