Nikkei rises helped by Japan's low inflation risk

* Asian investors buy Japan stocks on low risk of inflation

* Nikkei may hit 11,000 by end of March - analyst

By Ayai Tomisawa

TOKYO, March 1 (Reuters) - Japan's Nikkei average rose on
Tuesday as foreign investors continued adding Japanese shares on
a lower inflation risk while gains on Wall Street overnight
supported general sentiment.

Analysts said that despite ongoing uncertainty about higher
oil prices and developments in the Middle East, foreign investors
may chase the Japanese market higher, though some correction is
expected between the rises.

"U.S. and European investors have been the main players in
the Japanese market. But Asian investors have joined in as Japan
is one of the few countries with a low risk of rate hikes," said
Shun Maruyama, chief strategist at Credit Suisse. "They are
buying Japanese stocks on a process of elimination as Japan has
more tolerance for higher oil prices than other Asian countries."

China's battle with rising inflation is being watched closely
by investors globally as the steps it takes to curb demand impact
on growth rates that have become a key driver of the broader
world economy.

According to data released on Tuesday, Chinese manufacturing
growth slowed in February to a six-month low, as the government's
sustained campaign to tame inflation weighed on industrial
activity.

But soaring global commodity costs complicated the task of
monetary tightening, pushing a gauge of industrial input prices
to a three-month high in China's official purchasing managers'
index. [ID:nTOE71R08C]

Meanwhile, market analysts said investors are carefully
awaiting some key U.S. economic events. This week will see Fed
Chairman Ben Bernanke's testimony at the Senate Banking Committee
on Tuesday and U.S. jobs data on Friday.

"Generally, sentiment is positive. While concerns about
geopolitical risk from the Middle East could keep investors from
chasing the market higher in the short term, recent high volume
has proved that there still is foreign investor appetite in the
Tokyo market," said Hiroichi Nishi, general manager at Nikko
Cordial Securities.

At the midday break, the benchmark Nikkei .N225 had risen
0.7 percent, or 73.12 points, to 10,697.21. The broader Topix
.TOPX advanced 0.9 percent to 960.11.

Credit Suisse's Maruyama said the Nikkei may recover to
11,000 by the end of March, a level last seen in May last year,
before the market was hit by Greece's debt crisis.

Asahi Kasei (3407.T) gained 1.2 percent to 571 yen after the
Nikkei business daily said it will team up with Nissan Motor Co
(7201.T) and Omron Corp (6645.T) to develop an inexpensive power
storage system made using recycled electric-vehicle batteries.

Softbank Corp (9984.T) gained 0.9 percent to 3,385 yen in
heavy trade after the Nikkei reported it will team up with
General Electric Co (GE.N) and launch a domestic off-site data
storage service for medical images in September.

Shinsei Bank (8303.T) rose 6.7 percent to 111 yen on heavy
volume after it said on Monday it would raise up to 69.4 billion
yen ($850 million) by offering newly issued shares to overseas
investors as it tries to bolster its capital base to meet tougher
global rules.

Although the amount to be raised was slightly bigger than
some analysts expected, the detailed announcement helped
investors shrug off fears of dilution and focus on the long-term
positive aspects of the move, market players said.
(Additional reporting by Antoni Slodkowski; Editing by Joseph
Radford)