The Nikkei average closed 0.6 percent higher on Thursday, after hitting its lowest level in a week, as telecoms including KDDI Corp gained on a bullish brokerage report and steel stocks rose on better outlooks.
Nippon Oil Corp surged 9.1 percent to 1,024 yen after it said it will start paying for Iranian crude oil in yen instead of dollars, alleviating the impact of currency moves on its revenues.
The market had fallen earlier on sharp losses in property stocks, which extended declines on worries about a slowing property market. Active trade in futures also made the cash market volatile.
Earnings forecasts from steel companies look good and the yen's moves are stable. That in the end made it hard to sell stocks too much, said Yosuke Shimizu, head of investment information at Monex Inc. The market rebounded with buying in futures.
Shimizu said property stocks were hard hit due to their high valuations.
There had been too much expectation about rising land and property prices, he said.
The Nikkei average gained 0.6 percent or 98.55 points to end at 16,257.00, after earlier falling to 15,840.05, its lowest since August 29.
The broader TOPIX index dipped 0.06 percent or 0.95 point to 1,568.52, after sinking more than 2 percent earlier in the day.
Trading volume was 2.1 billion shares, up from 1.8 billion on Wednesday. Decliners beat advancers by a ratio of more than 2 to 1.
TELECOMS RING UP GAINS
KDDI rose 2.5 percent to 863,000 yen after Nikko Citigroup said in a report on Wednesday it had initiated coverage with a buy/medium risk rating and a target price of 1.1 million yen.
Nikko Citigroup also started to cover Softbank Corp with a hold/speculative risk rating and set a target price at 2,350 yen. Softbank jumped 4.5 percent to 2,200 yen.
The brokerage firm said: We think KDDI and Softbank have room to cut handset procurement expenses in the fiscal year to March 2008, and their subscriber acquisition momentum is impressive.
In the steel sector, Nippon Steel Corp advanced 1.8 percent to 814 yen and JFE Holdings rose 2 percent to 7,540 yen.
Nippon Steel raised its full-year net profit forecast by 4 percent to 365 billion yen and said it would pay a higher first-half dividend after Japanese carmakers agreed to pay more for its sheet steel. JFE Holdings also raised its full-year recurring profit estimate.
Property stocks extended losses with industry leader Mitsui Fudosan Co Ltd falling 2.5 percent to 2,710 yen. Mitsui Fudosan is trading at a PE of 28, down from more than 40 when it hit this year's high of 4,000 in May.
Sumitomo Realty & Development Co lost 4.3 percent to 3,370 yen.