Nikkei rises 1.3 percent as yen helps

TOKYO (Reuters) - Japan's Nikkei average rose 1.3 percent on Thursday as Nissan Motor (7201.T) jumped on news that it plans smaller output cuts, helping ease market fears about slumping demand, while a weaker yen helped other exporters.

But Advantest Corp (6857.T) tumbled after the company warned it faces a record $804 million annual loss, while drugmaker Daiichi Sankyo (4568.T) dropped after U.S. regulators said Indian generic drugmaker Ranbaxy Laboratories (RANB.BO), in which Daiichi holds a controlling stake, had falsified data.

"The market continues on a recovery track after U.S. trade was relatively calm. There's also the softer yen," said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC.

"News about Nissan's smaller production cuts also indicates that we may be getting out of a state of crisis, though a lot will still depend on economic stimulus measures by the U.S. government."

On the policy front, a newspaper reported that the Japanese government is considering asking the central bank to buy stock exchange-traded funds (ETFs) to prop up Japanese share prices.

"News like this may help stop a further tumble in the market but it is not something that will push it up," said Masayoshi Okamoto, head of dealing at Jujiya Securities.

The benchmark Nikkei .N225 ended the morning up 99.09 points at 7,560.31, after ending the previous day up 2.7 percent. On Tuesday, it fell as low as 7,155.16 -- within sight of a 26-year low just under 7,000.

The broader Topix .TOPX gained 0.6 percent to 750.29, after earlier in the week hitting its lowest close since December 1983.

The Dow Jones industrial average .DJI shed 1.1 percent on Wednesday as homebuilders and big manufacturers fell after data showing sales of previously owned U.S. homes plunged much more than expected in January.

NISSAN JUMPS, ADVANTEST TUMBLES

Nissan climbed 3.3 percent to 310 yen after Japan's third-largest carmaker said it plans to reverse some of its production cuts at Japanese plants in March after earlier output cuts helped to reduce inventory.

Automakers are now starting to restore some production as inventories stabilize with Toyota Motor Corp (7203.T), the world's biggest automaker, planning to raise output slightly in May.

Honda Motor Co (7267.T) leapt 3.3 percent to 2,475 yen, but Toyota dipped 0.6 percent to 3,200 yen.

Other exporters initially advanced on help from a weaker yen, though many gradually lost steam by the end of morning trade.

The dollar rose as high as 97.88 yen on trading platform EBS, its highest since mid-November and up 0.5 percent on the day. Investors usually welcome a softer yen as it boosts exporters' profits when repatriated.

TDK Corp (6762.T) added 1.2 percent to 3,340 yen, though Canon Inc (7751.T) turned into negative territory to fall 0.4 percent to 2,495 yen.

Among decliners, Advantest plunged 8.6 percent to 1,303 yen after the world's biggest supplier of machines that test semiconductors said it would cut more than a quarter of its workforce and warned it faces a record $804 million annual loss.

Drugmaker Daiichi Sankyo dropped 5.5 percent to 1,754 yen after U.S. regulators said there was evidence that a plant owned by Ranbaxy had falsified data and test results submitted in approved and pending drug applications.

The two stocks were the top drags on the Nikkei 225.

Trade was active on the Tokyo exchange's first section, with 943 million shares changing hands, compared with last week's morning average of 819 million.

Advancing stocks outnumbered declining ones, 796 to 729.

(Editing by Chris Gallagher)