Asian stocks edged higher on Wednesday, with thin summer trading volumes keeping prices choppy and centered on short-term chart targets, while oil hovered near $72 a barrel, capped by a surprising rise in U.S. inventories.

U.S. single-family home prices grew for a second straight month, a report showed overnight, confirming the recovery is on track.

However, having already priced in an upturn in the global economy, investors were looking for more signs that growth can be sustained once the impact of massive government stimulus spending fades.

Volatility in Chinese shares has also kept investors guessing. The Shanghai composite index is down 14 percent so far in August, on track for the biggest monthly decline since the darkest month of the financial crisis in October 2008.

The precipitous move triggered questions on whether other high flying equity markets were due for a correction. However, to what extent a decline in the Chinese market, which is largely closed to foreign investors, matters for global market trends and perceptions of risk is an open question.

Japan's Nikkei share average drifted up 0.6 percent, within reach of a 10-month high reached earlier in August.

The (U.S. economic) data is encouraging because it points to continued economic improvement, but the Nikkei won't rise that much because investors are a bit wary about the chances of an adjustment. After all, it has risen around 50 percent since March, said Kenichi Hirano, operating officer at Tachibana Securities in Tokyo.

Shares of index heavyweight Toyota Motor Corp <7203.T> rose 1.5 percent on a report the carmaker would cut global production capacity and post an operating profit in the 2010 financial year.

However, while news of the output cut shored up the stock, it also reinforced worries about persistent weakness in global consumer demand, which is key to a solid recovery.

The MSCI index of Asia Pacific stocks traded outside Japan rose 0.1 percent <.MIAPJ0000PUS>, weighed by weakness in the technology and consumer discretionary sectors -- two of the most expensive segments of the Asian market.

Hong Kong's Hang Seng index <.HSI> was up 0.3 percent but remained susceptible to ups and downs in the Shanghai composite index <.SSEC>, which was up 0.6 percent.

The Ifo survey of German business sentiment is expected to show an across the board pickup later on Wednesday, playing into the story that recoveries are taking hold around the world.

However, in a worrying development, Japan's exports slipped in July as annual drops in exports to the United States and China accelerated, in a sign that the impact of stimulus measures in major economies worldwide may be starting to wane.

Things have stopped getting worse, but a return to trend gains in production and trade is a pipe-dream, Patrick Bennett, Asia foreign exchange and rates strategist with Societe Generale in Hong Kong, said in a note.

U.S. oil futures for October delivery were largely unchanged on the day around $72 after a 3 percent drop overnight on profit taking after the market was unable to push crude above $75 a barrel.

Inventory data from the American Petroleum Institute late on Tuesday showed a big buildup in U.S. crude oil stocks last week, keeping a lid on the market.

Still, that appeared only a short-term setback. Analysts raised their 2010 median price forecast for a fifth straight month to $73.39.

The yen edged up in quiet trade, lifted by Japanese exporters and short-term investors.

The U.S. dollar slipped 0.2 percent to 93.98 yen. Sterling fell 0.4 percent to 153.33 yen, and the euro was down 0.2 percent to 134.38 yen.

The Australian dollar inched up 0.1 percent to US$0.8357 and this week has been less reactive to domestic Chinese stock market moves. Earlier in August, sudden drops in the Shanghai market sucked the Australian currency down with it.

(Additional reporting by Elaine Lies in Tokyo)

(Editing by Kim Coghill)