Japan's Nikkei average rose 0.5 percent on Wednesday, with blue-chip shares that had been sold off on concerns about fiscal stability in Europe regaining ground with news of potential aid for heavily indebted Greece.
Toyota Motor rose, with some market players saying its share price may have bottomed and despite a new recall of Camry sedans for steering problems but Honda Motor Co slipped on plans to recall more cars to replace an airbag deflator.
European governments have agreed in principle to help heavily indebted Greece, a senior German coalition source said on Tuesday, calming investors after risk aversion increased in the past two weeks on concern about the fiscal stability of Greece, Portugal and Spain.
It's hard to expect the problems in southern Europe will end up being limited in that region and it will likely take a while to have them solved on the global scale, said Hajime Nakajima, deputy general manager at Cosmo Securities.
The market will probably be range-bound until around early spring.
The benchmark Nikkei added 53.07 points to 9,985.97, after edging down to a two-month closing low the previous day. Pressured by worries about euro zone fiscal woes, the Nikkei has shed more than 9 percent since it hit a 15-month high in mid-January.
The broader Topix rose 0.5 percent to 885.70.
Japan's core machinery orders rose more than expected in December from the previous month, easing concern that capital spending may continue to slump and shackle the economy's fragile recovery.
This boosted individual machinery shares, but gains were expected to be limited, with economists noting the 20 percent jump followed a sharp fall the previous month.
Looking at the December number and then thinking that Japanese capex is starting to show strength is misplaced, said Takuji Okubo, chief economist at Societe Generale.
We have to look for more, stronger growth quarter-on-quarter and it's not there.
Market players said that investors, including commodity trading advisors (CTAs) appeared eager to sell a bit above 10,000, and that this would also limit gains.
TOYOTA GAINS, HONDA DOWN
In the latest blow to its reputation, Toyota said in a document sent to U.S. dealers and obtained by Reuters that 2010 Camrys equipped with a 4-cylinder engine might have a shorter-than-required power steering pressure hose in their engine compartments.
Toyota shares rose 1.2 percent to 3,415 yen after briefly dipping into negative territory, while Honda slipped 0.8 percent to 3,035 yen.
The market has factored in Toyota's recent troubles and eyes are now on the fallout on its sales, which will surely sustain some impact, said Nakajima at Cosmo Securities.
Honda's recall is on things like airbags and not a fundamental part of the car. It's more like a way to highlight its safety standards. The stock is down now because of the expected costs, though that should be temporary.
Nissan Motor jumped 3.2 percent to 754 yen after Japan's third-largest automaker said it returned to quarterly profit and lifted its forecast for the second time, though warning of a still shaky outlook for the global car market.
Among shares of machinery firms, machine tool maker Okuma Corp climbed 2.3 percent to 537 yen and Amada Co, a maker of metal-processing machines, rose 3.7 percent to 647 yen. Industrial robot maker Fanuc Ltd advanced 1.8 percent to 8,950 yen.
Resource-related stocks climbed after oil and copper rose more than 2 percent each on Tuesday, recovering further ground last week's sell-off, as a weaker dollar and anticipation of higher physical demand brought buyers back to commodities.
Trading firm Mitsubishi Corp gained 1.8 percent to 2,175 yen, while oil and gas field developer Inpex rose 1.4 percent to 665,000 yen.
Blue-chips which advanced included Sony Corp, which rose 1.7 percent to 3,035 yen and Canon, which gained 1 percent to 3,550 yen. Tokyo Electron advanced 3.2 percent to 5,510 yen.
(Editing by Edwina Gibbs)