Nikkei claws toward 10-mth high, exporters weigh

* Nikkei clings near 10-month high, eyes 10,800 target * Blue-chip exporters pause after leading market rally

* Construction shares gain in the wake of storm, earthquake

* Market shrugs off BOJ rate decision; China data as expected

By Aiko Hayashi

TOKYO, Aug 11 (Reuters) - Japan's Nikkei stock average edged up 0.2 percent on Tuesday towards a 10-month high, with construction stocks like Obayashi Corp (1802.T) gaining in the wake of an earthquake and a storm that triggered mudslides.

Nippon Sheet Glass (5202.T), a major glass maker, surged after a brokerage initiated coverage with a "buy" rating, but exporters including Honda Motor Co (7267.T) took a breather after leading a rally in the broader market.

Analysts said investors shrugged off news from the Bank of Japan and Chinese economic data and instead focused on individual stocks with specific news as the overall market lacked convincing moving factors and a direction.

"The Nikkei's current level of around 10,500-11,000 is based on investor expectations for a 'V-shaped' recovery in earnings in the next business year," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.

"But evidence so far is not yet convincing enough for such a recovery for real and investors will need more evidence. Trade could be rangebound until earnings reports for the first half (April-September) run their course."

Akino added market falls are also likely to be limited due to the absence of aggressive sellers as very little negative news has emerged.

During the Tokyo market's midday break, the BOJ announced it was keeping interest rates on hold and maintained its cautious view on the economy. [ID:nT328059]

Meanwhile, China reported below-forecast growth in factory output and investment, underlining why senior officials keep reminding markets that recovery in the world's third-largest economy is not yet on solid ground. [ID:nPEK216341]

The benchmark Nikkei .N225 added 18.96 points to 10,543.22, heading up towards a 10-month high of 10,585.37 hit on Monday, while the broader Topix rose 0.1 percent to 970.36. The Nikkei's next target is likely to be 10,800 -- a 50 percent Fibonacci retracement from its June 2008 high and last October's 26-year low just under 7,000 -- followed by 11,000, roughly the level from which it fell rapidly after Lehman Brothers failed last September.

CONSTRUCTION FIRMS RESILIENT

Major manufacturers including Suzuki Motor (7269.T), Yamaha Motor (7272.T), Panasonic (6752.T), Sony (6758.T) and Fujitsu Ltd (6702.T) said they had not seen damage to their factories in the area of the quake on Tuesday morning, which was centred southwest of Tokyo. [ID:nT322240]

But construction shares gained on expectations for reconstruction efforts after recent floods and the earthquake, market players said. They added the sector was also playing catch-up as it lagged behind during the market recovery-run led by exporters.

Obayashi Corp jumped 4.7 percent to 443 yen, Shimizu Corp (1803.T) climbed 2.8 percent to 399 yen and Taisei Corp (1801.T) advanced 3.2 percent to 224 yen.

The construction subindex .ICNST.T rose 2.1 percent, becoming the second-biggest gainer among the subindexes.

The biggest gainer at 2.6 percent was the insurance sub-index .IINSU.T, with shares such as non-life insurer Aioi Insurance (8761.T) rising 3.7 percent to 475 yen after booking a large jump in quarterly profit.

Daiichi Sankyo (4568.T), Japan's third-largest drug company, extended gains to shoot up 5.8 percent to 1,924 yen after it and Australian biotech firm Biota (BTA.AX) said on Monday that a new flu drug candidate has succeeded in late-stage trials in Asia.

Nippon Sheet Glass surged 9.2 percent to 355 yen after Bank of America Merrill Lynch initiated coverage with a "buy" rating, citing expectations of a significant earnings contribution from price hikes on European construction-use glass.

But exporter shares took a breather. Honda (7267.T) slid 2.5 percent to 3,130 yen, while electronics components maker TDK Corp (6762.T) lost 3.1 percent to 5,340 yen and chip equipment maker Tokyo Electron Ltd (8035.T) slipped 0.8 percent to 5,170 yen. (Editing by Joseph Radford)