Nikkei edges back towards 10-mth high on Fed relief

* Advantest, other exporters lead Nikkei higher

* Kawasaki Heavy, train makers surge on Vietnam train report

* Trend is upwards but investors remain cautious

By Elaine Lies

TOKYO, Aug 13 (Reuters) - Japan's Nikkei average edged back towards a 10-month high on Thursday on relief after the Federal Reserve suggested the U.S. economy is through the worst of the recession, with economy-sensitive exporters such as Advantest Corp (6857.T) leading it higher. In thin trade investors sought out individual shares related to specific themes, with Kawasaki Heavy (7012.T) and other companies involved in making trains surging on a report that Vietnam will use Japan's bullet train technology in building its high-speed railway system.

Denso Corp (6902.T), the world's biggest listed auto parts maker, rose 3.4 percent after Mitsubishi UFJ Securities raised its rating on the stock to "1" from "3" and set a target price of 3,680 yen.

Analysts said the market welcomed the absence of surprises on the Fed's closely watched exit strategy, in which it will continue to stick to its current measures, but investors remain wary.

"The Fed's view on the economy has become markedly stronger and the results satisfied both the bond and the stock markets," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

"But even though there are improvements in aspects of the U.S. economy and share markets are getting stronger, they're still a lot lower than they were a year ago and people are worrying about overvaluation."

The Fed said the economy was levelling out and left interest rates unchanged at the end of its two-day policy meeting on Wednesday.

It also said it would extend by one month until October the duration of a programme to buy long-term government securities but would not increase the amount of purchases. [ID:nN1272730]

"This is a market that definitely wants to go higher, but we won't see a real recovery until we have strong improvement in the real economy," said Tomomi Yamashita, a fund manager at Shinkin Asset Management.

The benchmark Nikkei .N225 rose 0.8 percent or 82.19 points to 10,517.19, edging back towards a 10-month high of 10,587.36 hit on Tuesday, with gains in Hong Kong shares .HSI providing an additional boost in afternoon trade. [ID:nHKG2290]

The broader Topix rose 0.9 percent to 968.41.

EYES ON GDP, ELECTION

With the long-awaited Fed meeting and a slew of Chinese indicators out of the way, analysts said eyes are now on Monday's announcement of second quarter Japanese gross domestic product data and Japan's Aug. 30 general election.