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Japan's Nikkei share average inched up in choppy trade on Wednesday, with investors still wary after last week's tumultuous trade raised concerns about the outlook as the market retreats from 5-1/2-year highs.
The Nikkei finished up 0.1% at 14,326.46, after trading as high as 14,512.28 and as low as 14,243.49.
The index saw its first two-straight days of gains since last Thursday's 7.3% slide, its biggest one-day %age drop since the March 2011 earthquake and tsunami.
Analysts said the volatility may persist for a few weeks.
"The Japanese market has entered a period of volatility. Though extreme volatility in a single day is unlikely in the coming days, trade may be choppy as investors are risk-averse," said Makoto Kikuchi, the chief executive of Myojo Asset Management.
"They haven't forgotten about the shock from last week."
High frequency programme trade on futures triggered Thursday's dive after weak factory activity data in China, Japan's second-biggest export market, and Federal Reserve chief Ben Bernanke's suggestion the massive US stimulus could be rolled back this year.
Hikaru Sato, a senior technical analyst at Daiwa Securities, expects the Nikkei to largely stay above the 14,000-mark over the next few weeks, and said support is seen at its 13-week moving average of 12,586.31. The market is well off the 15,942.60 level reached last week, the highest mark since December 2007.
"The next domestic catalyst would be Abe's unveiling of the growth strategy in mid-June," Sato said. "Until then, global economic events and US market movements may cause some volatility in the Japanese market."
Prime Minister Shinzo Abe has said he wants to unveil the growth strategy before the June 17-18 Group of Eight summit in Northern Ireland.
On Wednesday, the recently battered financials rose, with Mitsubishi UFJ Financial Group gaining 1.2%, Sumitomo Mitsui Financial Group (SMFG) adding 1.2% and insurer T&D Holdings advancing 3.6%.
Exporters were mixed, with Toyota Motor Corp falling 0.2 %, Komatsu Ltd rising 1.6% and Panasonic Corp adding 0.4%.
Index heavyweight SoftBank Corp rose 2.1% after a Reuters source confirmed a Wall Street Journal report that the Japanese company and Sprint Nextel Corp have reached a deal with US authorities to address any national security concerns arising from SoftBank taking control of the US telecoms carrier.
The broader Topix index climbed 0.9% to 1,178.87 in thin trade, with 3.91 billion shares changing hands, compared to last week's average daily volume of 6.21 billion shares.
The Nikkei is still up 16% since April 4, when the Bank of Japan announced a sweeping monetary expansion campaign to eradicate years of deflation and revive growth. The aggressive stimulus pursued by the central bank and government has driven the index up 38 % so far this year.
The Nikkei's 30-day implied volatility stood at 34.8% on Tuesday, easing from a four-year high of 38.2% hit last Thursday but it remained way above the May 22 level of 26%, according to Thomson Reuters Datastream. That compared with some 12% for the US S&P 500 and 16% for the Euro STOXX 50 index.
