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Japan's Nikkei average edged down in choppy trade but managed to end above 13,000 on Tuesday, with most players staying on the sidelines as they awaited the outcome of the US Federal Reserve's meeting for clues on when it may begin tapering back stimulus.
The Nikkei slipped 0.2% to 13,007.28 points after trading as high as 13,139.48 earlier.
Exporters were mixed, with Toshiba Corp rising 1.1%, while Panasonic Corp dropped 0.5% and Toyota Motor Corp rose 1.8%.
Sony Corp climbed 4.4% after New York-based hedge fund company Third Point said it had raised its stake in the Japanese firm and asked for an opportunity to present its proposal for a partial spin-off of Sony's entertainment unit to the board.
The Japanese market has seen extreme volatility accompanied by steep declines over the past few weeks as investors cut their long Japanese equities and short yen positions on worries of reduced stimulus from the Fed.
Disappointment over an underwhelming package of structural reforms unveiled recently and worries over slowing growth in China also contributed to the market tumult.
The index slumped into bear market territory to reach a low of 12,415.85 last Thursday, a level last seen before the Bank of Japan announced sweeping monetary easing steps on April 4, falling more than 20% from a 5 1/2-year high hit on May 23.
Markets are looking to the Fed to clarify the outlook on its massive stimulus programme when the US central bank concludes its two-day policy-setting meeting on Wednesday.
"The market is assuming that he (Fed Chairman Ben Bernanke) won't be announcing anything drastic that would shock the market" given how sensitive they have become to comments on policy, said Fujio Ando, a strategist at Chibagin Securities. "Investors are not overly worried, but they are still careful about taking positions because of recent volatility in the market."
Underscoring the volatility, since May 23 the Nikkei has had 15 sessions where intraday swings exceeded 2.5%, compared with 16 such trading days for the year up to May 22 and four such days in the whole of 2012. The US S&P 500 only has had one such trading day in 2013, and the Euro STOXX 50 index has 11.
Some analysts expect the Fed policy outlook may become clearer in coming months.
"Tapering the stimulus by small increments is possible... But the Fed won't likely do so unless the US economy shows a steady recovery, and a test period will be June-August," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley.
The broader Topix gained 0.2% to 1,086.40.
Volume was light, with only 2.43 billion shares changing hands, the lowest since last December.
BNP Paribas remained bullish on Japanese equities in the medium term.
"We have witnessed an improvement in fundamentals (as confirmed during the Q1 earnings) and thus believe the recent correction provides a good entry opportunity for the medium term," it wrote in a note to clients.
The brokerage recommended investors sell put options on Toyota Motor Corp , lender Sumitomo Mitsui Financial Group , Toshiba Corp and Fujifilm Holdings Corp with September expiry to take advantage of high implied volatility.
The benchmark Nikkei has fallen 18% since that mulityear high on May 23, but is still up 5.2% since April 4, when the Bank of Japan unveiled sweeping stimulus measures and has risen 25% this year.
