* Brokerages rise on foreign buying
* Mitsubishi Motors surges on hopes for tie-up with Nissan
* Volume up, retail investors encouraged by foreign buying
* Stocks related to China, commodities strong on China data
By Antoni Slodkowski and Ayai Tomisawa
TOKYO, Dec 14 (Reuters) - Japan's Nikkei average edged up 0.2 percent Tuesday, posting a seven-month closing high for a second day as upbeat Chinese economic data encouraged buying of commodity stocks and construction equipment makers.
Buying by overseas investors, who picked up stocks in the brokerage sector, also fuelled the rise.
Foreign funds have been aggressively buying lagging Tokyo shares, pushing the Nikkei up more than 12 percent over the past six weeks.
"We're still seeing foreign buying and it will probably last for another few weeks," said Tsuyoshi Kawata, a senior strategist at Nikko Cordial Securities, adding that volume may fall a bit around Christmas when foreign investors will likely be away for the holidays.
He said the Nikkei may continue its gains, but resistance would keep it pegged at around 10,500 by the end of the year.
Analysts believe the government is poised to cut Japan's corporate tax rate by 5 percentage points as demanded by business leaders to achieve its growth strategy, and such a move could help boost the competitiveness of Japanese companies.
"We respect Prime Minister Kan's decision to reduce the effective corporate tax rate by 5 percent amid a severe fiscal situation. We see this as the first step in the government's growth strategy that aims to reduce the effective corporate tax rate to those of other developed nations," Hiromasa Yonekura, chairman of business lobby Nippon Keidanren, said in a statement. [ID:nTOE6BD02H]
"Foreign securities houses, which place blocks of orders ahead of the Tokyo opening, have been increasingly bullish for 12 straight days with most 'buy' orders placed on Tuesday, adding to the overall positive mood," said Kazuhiro Takahashi, general manager at Daiwa Capital Markets.
The benchmark Nikkei .N225 rose 22.88 points to 10,316.77.
The broader Topix index .TOPX gained 0.5 percent to 901.89.
If the Nikkei can hold on to its gains, retail investors are likely to jump on the bandwagon, boost volume and help it pierce strong technical resistance at 10,420.74, the level where futures and options contracts expiring in December settled on Friday, traders said.
NIKKEI UPBEAT ON CHINA
Many investors had feared China would raise interest rates to slow growth, but instead it merely increased the amount of extra capital top banks must hold. [ID:nL3E6ND0F6]
"Both Hong Kong and Shanghai gained rapidly yesterday. They may lose a bit on Tuesday, putting Tokyo equities under pressure," said Daiwa's Takahashi.
As industrial output in China in November topped expectations, shares in China-related firms gained, with Inpex (1605.T) rising 2.6 percent to 480,000 yen and Komatsu Ltd (6301.T) Ltd gaining 1.2 percent to 2,491 yen. Reports showing that China's economy remains on the boil drove copper to record highs on Monday and triggered rises in many other commodities. [ID:nLDE6BC13W]
Mitsubishi Motors (7211.T) surged 8.5 percent to 128 yen after it announced together with Nissan Motor Co (7201.T) that the firms would hold a joint news conference at 3:30 p.m. (0630 GMT) in Tokyo.
The companies said after the market close that they would expand their scope of cooperation, especially in the fields of minivehicles for the Japanese market and for commercial vehicles globally. [ID:nTKB007196]
Nissan Motor's shares modestly outperformed the market, gaining 0.3 percent to 809 yen.
Media stocks climbed, with TV Asahi Corp (9409.T) adding 4.2 percent to 137,700 yen and Fuji Media Holdings (4676.T) rising 1.2 percent to 128,500 yen after both companies were upgraded by Daiwa Securities Capital Markets to "2" from "3". [ID:nTOE6BD00D]
Volume picked up on the Tokyo Stock Exchange's first section, with 2.4 billion shares changing hands, up 20 percent compared with Monday's volume. Advancing issues outpaced declining ones by a ratio of about 3 to 1. (Additional reporting by Ayai Tomisawa; Editing by Michael Watson)