* Nikkei rises 0.7 pct for day, 1.9 pct for week * Market keenly watching Abe-Obama talks * Financials retreat after recent gains By Tomo Uetake TOKYO, Feb 22 (Reuters) - Japan's Nikkei average rose on Friday as investors scooped up bargains after the index fell sharply the previous session, though they remained cautious ahead of the Japan-U.S. summit, the Bank of Japan governor nomination and Italy's elections. The Nikkei ended 0.7 percent higher at 11,385.94 after dropping as much as 1.2 percent during the session on concerns over economic growth in the United States and euro zone. For the week, the benchmark advanced 1.9 percent, the second straight weekly gain. "Some exporters, which were big losers in the morning session, trimmed early losses towards the market close. The market was still keen to buy on the dip," said Naoki Fujiwara, chief fund manager at Shinkin Asset Management. Mazda Motor Corp, which during the morning was down as much as 3.7 percent, recovered to end 1.1 percent higher. But investors were cautiously watching to see if the United States backs Japan's plans to revive its economy, which have driven the yen down more than 16 percent against the U.S. dollar since mid-November. Uncertainty around this weekend's Italian elections also capped demand. "Investors are watching how the long-term interest rates, CDS spreads and the euro will move after the election," said Nobuhiko Kuramochi, a strategist at Mizuho Securities. After the Nikkei this week hit a record high and tested the 11,500- level, "the market is vulnerable to profit-taking triggered by negative overseas factors," he said. ABE-OBAMA SUMMIT Prime Minister Shinzo Abe meets U.S. President Barack Obama in Washington later on Friday, seeking to put a strong alliance on display and looking for support for his economic revival policies of big spending and hyper-easy monetary policy. "Investors will be watching headlines out of the meeting, and they are highly sensitive to what they would mean to the Japanese economy," said Hiroichi Nishi, an assistant general manager at SMBC Nikko Securities. The broader Topix, which was in negative territory until the last minutes of Friday's session, added 0.1 percent to 963.48. Trading volume on the Topix was relatively light, with 3.3 billion shares changing hands, compared with last week's daily average volume of 4.03 billion shares. Financial stocks, beneficiaries of Abe's reflationary policy, lost ground. Mitsubishi UFJ Financial Group slipped 1.4 percent and Sumitomo Mitsui Financial Group fell 0.7 percent. Some of the bigger exporters were also sold off, with Toyota Motor Corp falling 0.7 percent. Nikko Securities' Nishi said that market sentiment was also undermined by worries over how long the U.S. Federal Reserve will keep quantitative easing in place. In the U.S., data from jobless claims to factory activity and consumer price inflation pointed to slow economic growth and supported the argument for the Fed to maintain its monetary stimulus. Analysts said that most investors were also holding fire until the nomination of a new Bank of Japan governor next week. "It hasn't changed my medium-term view towards Japanese stocks. I still expect the Nikkei to hit 12,000 by the end of March," Yuya Tsuchida, a strategist of Toyo Securities, said. Tosoh Corp jumped 5.6 percent after the Nikkei business daily reported the chemical maker had developed materials that can prevent lithium-ion batteries from bursting or catching fire under extremely hot conditions. The report said that with Boeing Co 's 787 Dreamliner grounded due to problems with its lithium-ion batteries, Tosoh's newly developed materials could gain attention as a possible solution.