TOKYO (Reuters) - Japan's Nikkei share average steadied on Wednesday after the previous session's sharp fall as better-than-expected U.S. manufacturing data eased concerns about slowing growth in the world's largest economy.
An Institute of Supply Management report showed the strongest rate of manufacturing growth in 10 months in April, offsetting speculation that the Federal Reserve may embark on another bond buying program to bolster growth and lifting the dollar from a 2-1/2-month low against the yen.
Exporters recovered from Tuesday's hefty losses, countering a 1.1 percent fall in index heavyweight Fast Retailing (9983.T) ahead of its monthly sales data due later in the day.
The Nikkei .N225 was flat at 9,351.46 by the midday break. The benchmark hit a 2-1/2-month closing low on Tuesday.
"Compared to February when a lot of foreigners were buying, there has been a little bit more hesitation," said Jun Yunoki, an equity strategy analyst at Nomura. "Retail investors are buying on the dips. The sentiment is not that bad."
The Nikkei volatility index .JNIV, Japan's fear gauge, fell 3.9 percent after gaining 0.8 percent on Tuesday. The lower the volatility index, the higher the risk appetite.
Yunoki said the Nikkei was likely to trade in a range of 9,200 to 10,250 for some time because of euro zone debt concerns and the risk of the dollar weakening against the yen in the short term.
Toyota Motor Corp (7203.T) added 0.2 percent, Nissan Motor Co (7201.T) gained 0.6 percent and Sony Corp (6758.T) rose 0.4 percent.
"A little bit of snap back in some names," a dealer at a European bank said. "Few names are very disappointing. TDK is still trading down, Sharp is still trading down."
Sharp Corp (6753.T) shed 4.5 percent to hit a fresh 28-year low in heavy volume after tumbling 9.3 percent on Tuesday as investors were downbeat on its outlook for the business year.
Morgan Stanley cut its price target on Sharp and kept its "underweight" rating.
TDK Corp (6762.T) dropped 2.2 percent, extending the previous session's 6.6 percent fall as its operating profit forecast for the year ending March 2013 came in below market expectations.
The broader Topix .TOPX gained 0.2 percent to 790.65.
Trading volume on the main board after the midway point was light, at 30 percent of its full daily average for the past 90 days, as Japanese markets will be closed on Thursday and Friday for national holidays.
JAPAN TOBACCO, GREE RISE
Japan Tobacco (2914.T) climbed 2.4 percent after its incoming President Mitsuomi Koizumi told the Nikkei newspaper that the company was considering raising cigarette prices in Japan in a bid to reach an average 4 percent growth in earnings from its domestic tobacco operations.
Strong results boosted refiner Idemitsu Kosan Co (5019.T), which gained 4 percent after its operating profit for the fiscal year that ended in March beat market expectations.
Of the 62 Nikkei companies that have reported January-March earnings so far, 73 percent have beat or met market expectations, Thomson Reuters StarMine data showed.
Gree Inc (3632.T) climbed 2.8 percent after the mobile game operator said its subsidiary Gree International Inc had agreed to buy Funzio Inc, a U.S. social game publisher on smartphones, for $210 million.
Research firm Data Explorers said Gree was the third most shorted Internet company in Asia. Other Japanese companies on the most shorted list included Kakaku.com Inc (2371.T), Start Today Co Ltd (3092.T) and Mixi Inc (2121.T).
(Editing by Chris Gallagher)