Japan's Nikkei share average climbed 1% to snap four straight days of losses, boosted by decent US corporate results and an easing yen, though appetite for risk was tempered by political uncertainty in Europe and ahead of key central bank meetings.
The dollar hit an intraday high of 81.6 yen after strong earnings from US companies including Apple Inc, temporarily pushing the Nikkei to 9,643.27, above its 13-week moving average of 9.630.08.
But the prospect of Federal Reserve and Bank of Japan meetings later this week kept any bullish sentiment in check ahead of Japan's earning season, which started in earnest after the bell with Canon Inc raising its full-year profit forecast.
"There's lots of uncertainty about events in the near future, so today's small rise was probably a temporary bounce-back, mainly off the back of the weakening yen," said Hiroyuki Mutsuro, head of execution support at Mizuho Securities.
The Nikkei advanced to 9,561.01 on Wednesday, with the securities sector gaining 4.2% as one of the biggest gainers on the back of the weakening yen. The broader Topix rose 0.7% to 809.49.
After a week of thin volume, the number of shares traded on the main board stuttered to a three-month low of 1.43 billion.
"The market is suffering from a lack of direction at the moment; trading is thin and there are a lot of short-term bets on," said Hisao Matsuura, vice president of equity strategy at Nomura Securities. "This week will be quiet as investors wait to see if the BOJ will ease or not."
Sources told Reuters on Tuesday that the BOJ is likely to ease monetary policy on Friday by boosting asset purchases by up to 10 trillion yen and in doing so may extend the maturity of government bonds it targets to around three years.
Participants said the potential BOJ step was already well priced into the market, however, and that Tokyo stocks would not be jolted as they were after the central bank's last major move on February 14.
Apple crush
Apple's results crushed Wall Street's forecasts, boosting the share prices of related Japanese companies.
Foster Electric , which makes headphones for Apple's iPhones and iPods, jumped 4.6%, while Ibiden Co Ltd and Taiyo Yuden Co Ltd climbed 1.3 and 2.1% respectively.
Canon Inc gained 1.5% ahead of its results. A weakening yen boosted the value of the firm's overseas earnings and burgeoning demand for higher-end digital cameras helped offset fewer sales of printers.
Other major companies will release their earnings reports in the next few weeks.
"Japanese companies are always quite conservative with their estimates but whether there are huge increases in their profit forecasts or not, a lot of stocks will seem good value," said Toshiyuki Kanayama, senior market analyst at Monex Inc.
"The price to earnings ratio of shares in the first section of the Tokyo Stock Exchange should fall to around 10 from about 20, which means the Nikkei could head back up to around 10,100 by June."
A widening of Europe's debt crisis could dampen any rises, however.
"We have the issue of government changes in France and the Netherlands. The speed of implementing the European fiscal pact may be hit by this, although I do think the direction towards implementing these changes remains in place," said Masayuki Doshida, chief market analyst at Securities Japan.
Investors, spooked by signs of rising political turmoil in Europe that threatened to derail the region's austerity pact, were relieved when successful auctions sent yields on Dutch, Spanish and Italian debt lower on Tuesday, a day after the government in the Netherlands collapsed in a crisis over budget cuts.
Concerns over European affairs, combined with sputtering growth in China and mixed economic data out of the US fueled a global equities correction in April.
The Nikkei has lost 5.3% so far this month after rallying more than 19% in the January to March period to post its best first-quarter performance in 24 years.
