The Nikkei stock average bounced off a major support line and rose 0.4 percent on Wednesday as investors snapped up shares of trading houses after Credit Suisse initiated sector coverage with an "outperform" rating, offsetting worries about eurozone debt.
Foreign players covered short positions after steep losses on Tuesday by placing large orders in Nikkei futures, while retail investors bought shares on dips after Chinese factory output and retail sales data beat expectations and boosted the Shanghai stock market.
The euro's reprieve from a plunge since the start of the week also helped the mood, but worries about debt contagion in the eurozone weighed. That depressed volumes on the cash market and limited short-covering in exporters, as the yen strengthened across the board and briefly sent the dollar below 79.00 yen for the first time since mid-March.
European Union leaders are expected to hold an emergency summit on Friday after finance ministers acknowledged for the first time that some form of Greek default may be needed to cut Athens' debt and stop contagion spreading to Italy and Spain. The benchmark Nikkei average closed up 37.22 points at 9,963.14, moving back towards the closely watched 10,000 line that it had fallen below the previous day. The Nikkei bounced back above key support at the 200-day moving average at 9,897.65 after breaching the level briefly in the morning. The broader Topix gained 0.4 percent to 860.53.
Market volumes remained lukewarm with 1.7 billion shares changing hands on the main board, below last week's average of 1.8 billion. Credit Suisse analyst Yuji Nishiyama started coverage of major trading companies with an "outperform" rating, citing cheap valuations. Japanese biggest commodity trader, Mitsubishi Corp, rose 1.8 percent to 2,069 yen, while the trading subindex was the second-biggest gainer on the Nikkei, adding 1.5 percent.
Traders as well as miners and energy stocks were also supported after London copper steadied on Wednesday, having gained in the previous session on hopes of further monetary policy easing by the US Federal Reserve. Advantest Corp shed 1.1 percent to 1,512 yen in active trade, while Tokyo Electron fell below its 25-day moving average, losing 1.6 percent to 4,275 yen. Tokyo Seimitsu skidded near three-month lows, shedding 2.8 percent to 1,486 yen.