The Nikkei stock average steadied on Thursday ahead of data which could show the U.S. economy is weathering Europe's debt storm, but the 8,500 level remained elusive amid fears of what news might come next out of the euro zone.
Embattled Olympus Corp closed higher for a fourth straight session on fading fears of a delisting but managed only a 1 percent gain after jumping more than 18 percent in morning trade.
France and Germany are split over the European Central Bank's bond buying role while Italian 10-year bond yields have risen back above 7 percent. Yields on bonds issued by France, the Netherlands and Austria - which along with Germany form the core of the euro zone -- have also climbed.
There are no fundamental reasons to be optimistic, and lots of negative factors about the European situation, said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley.
Outperformance by large-cap stocks such as Toyota Motor Corp and Sony Corp indicated that public pension funds were likely buying to support the market, he added.
The Nikkei edged up 0.2 percent to 8,479.63, while the broader Topix index added 0.5 percent to 727.71.
U.S. housing starts, jobless claims and regional manufacturing data are due to be released later on Thursday.
U.S. stock futures were also higher, suggesting investors could be positioning for gains ahead. S&P e-mini futures were last up 5.25 points to 1,236.25.
Among large-cap stocks, Toyota added 1.5 percent to 2,505 yen and Sony rose 1.1 percent to 1,322 yen.
Market participants say support lies at 8,400 and then its Oct. 5 low of 8,382.98 while 8,500 is a key resistance point that the Nikkei must overcome before next targeting its 5-day moving average, now around 8,520.
Volume was moderate with 1.52 billion shares changing hands on the main board, up from Wednesday's volume of 1.35 billion shares but still below last week's average volume of 1.74 billion.
NIPPON LIFE CUTS OLYMPUS STAKE Olympus was up 1.0 percent at 747 yen, topping the main board as the heaviest traded share by turnover.
Separately, Nippon Life Insurance, Olympus' top shareholder, said it had cut its stake in the company to 5.1 percent from 8.2 percent.
Institutions and funds are selling their holdings of Olympus, but as long as the company looks as if it might avoid delisting, hedge funds and speculators traders will keep buying it back, looking for short-term gains, said Masayoshi Okamoto, head of dealing at Jujiya Securities.
But, he added that the trend could quickly reverse if it appeared that the company might miss a Dec. 14 deadline to report its first-half earnings. Missing that deadline would result in an automatic delisting.
TDK Corp jumped 8.8 percent to 3,535 yen and was the third-heaviest traded share by turnover after Western Digital said it entered into an agreement with TDK subsidiary SAE Magnetics for the supply of components for hard disk drives. The supply tie-up will begin from the first calendar quarter of 2012.
Toshiba Corp rose 1.9 percent to 319 yen after the company said its lithium ion battery had been chosen for use in Honda Motor Co Ltd's new Fit electric vehicle, which goes on sale next summer in Japan and the United.