* Exporters rise on short-covering, Canon climbs on upgrade
* Nippon Electric Glass jumps on report of output boost
* New Japan govt's currency policies in focus - analyst
TOKYO, Sept 16 (Reuters) - Japan's Nikkei average rose 0.8 percent on Wednesday, buoyed by exporters such as Canon Inc after retail sales data helped lift U.S. stocks to highs for the year.
But analysts said gains were likely to be limited as investors carefully monitor policies of Japan's incoming government.
Yukio Hatoyama will take office as prime minister and is expected to announce his cabinet line-up on Wednesday after a huge election win on Aug. 30.
"Japanese companies with global operations are being bought for now, with investors encouraged by (Federal Reserve Chairman Ben) Bernanke's comment that the recession was probably at an end and after solid retail sales data," said Fumiyuki Nakanishi, manager at SMBC Friend Securities.
Bernanke, speaking on the one-year anniversary of the collapse of Lehman Brothers, said the recession "is very likely over."
"But the new government is seen as tolerant towards a stronger yen, which is negative for the stock market, and investors are now cautiously looking for further comments on its currency policies," Nakanishi said.
The benchmark Nikkei had risen 84.95 points to 10,302.57 by midmorning, after edging up 0.2 percent the day before. The broader Topix added 0.7 percent to 938.69.
U.S. stocks rose on Tuesday to 2009 highs as improvement in retail sales in August reassured investors about a rebound in U.S. economic demand. A rise in the government's Producer Price Index signalled increased consumption of raw materials.
Nippon Electric Glass shot up 4.5 percent to 952 yen after the Nikkei business daily said the company plans to spend about 40 billion yen ($440 million) to boost output of glass substrates used to make liquid crystal displays by 10 percent next year.
Exporters climbed on short-covering and were also helped by a halt in the yen's advance against dollar. The dollar hit a seven-month low below 91 yen earlier this week.
Investors fret about a stronger yen as it curbs exporters' profits when they are repatriated.
Canon Inc climbed 3.7 percent to 3,680 yen, after Nomura Securities raised its rating on the company to "buy" from "neutral" and hiked its target price to 4,218 yen from 3,462 yen.
Nomura cited Canon's Monday announcement that it will start providing its latest multi-functional printers to Hewlett-Packard later this year.
Tokyo Electron Ltd gained 2.8 percent to 5,440 yen and industrial robot maker Fanuc Ltd added 1.7 percent to 7,720 yen (Reporting by Aiko Hayashi; Editing by Chris Gallagher)