The Nikkei stock average rose on Wednesday after a media report raised expectations that Europe will act to strengthen the euro zone's rescue fund, though skepticism about whether it can put bold steps into practice curbed gains.

The market also lacked momentum on caution about a mixed batch of U.S. earnings after Apple reported a rare miss in quarterly results, with sales of its flagship iPhone falling short of Wall Street expectations.

This feels like a short sunny spell when you have to put up your washing, said Tetsuro Ii, the president of Commons Asset Management.

The Nikkei .N225 climbed 0.4 percent at 8,772.54, after rising as high as 8,831.55, while the broader Topix index .TOPX stood flat at 751.49.

Trade remained extremely light, with volume at 1.30 billion shares, nearly 40 percent below the average so far this year and the second lowest after Tuesday, when it hit the lowest since December.

Wall Street rallied in its last hour of trade on Tuesday after Britain's Guardian newspaper said France and Germany will increase the euro zone's rescue fund to 2 trillion euros as part of a plan to resolve the sovereign debt crisis.

But a senior euro zone source told Reuters there had been no mention of such a deal and many market players doubt whether such a huge increase is immediately possible given how policymakers have had a tough time getting the current 440 billion euro bailout scheme ratified in the euro bloc.

If they can boost the bailout fund to 2 trillion euro, that would be the perfect score markets have been looking for. But the reality is that will be difficult to pull off, said Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

While the news prompted short holders to cover their positions, many investors preferred to wait to see what European leaders do at their summit on Sunday.

I'm sure there will be a lot of headlines on the euro zone plan toward the summit and speculators will jump on them, swinging the market this way or that. But real money investors are waiting for the summit. That's why volume is slow, said Mitsubishi's Fujito.

RARE MISS

Apple's latest results undermined tech shares, although an upbeat earnings forecast from Intel Corp helped minimize the impact.

Ibiden, a major supplier of integrated circuit packages to the U.S. firm, rose 2.8 percent to 1,895 yen.

Olympus remained the most actively traded share by turnover on the Tokyo Stock Exchange's main board for the fourth day in a row as the company suffers from allegations by its former CEO that it made improper M&A fee payments.

Olympus fell 2.0 percent to 1,389 yen, though it has so far managed to stay above Tuesday's 2-1/2 year low of 1,281 yen.

There were bids from investors who saw value in the company's strength in its endoscope business and traders also cited increasingly difficult conditions for selling the issue short, as the amount of shares available for lending is evaporating.

Still, doubts about the company's governance are making the stock untouchable for many investors.

Foreign investors had snatched up the shares after they hired a foreign CEO and they haven't offloaded their holdings yet, said a trader at a Japanese firm.