TOKYO, June 9 (Reuters) - Japan's Nikkei stock average may edge higher on Tuesday, a day after hitting an eight-month high, with exporters such as Canon Inc strong as the yen remains weak against the dollar.
But gains were expected to be limited, with investors moving to take profits as the benchmark approaches the psychologically important 10,000 level.
"There's a slight sense that the Nikkei may be overheated after recent gains, and this will keep rises capped," said Hiroichi Nishi, general manager at the equity division of Nikko Cordial Securities.
"But behind everything is the sense the recession is starting to ease, as the economy watchers survey showed yesterday, and this will prompt bargain-hunting and buying on dips."
Sentiment among service sector workers such as taxi drivers, hotel staff and restaurant employees -- called "economy watchers" for their proximity to consumer and retail trends -- rose to a one-year high in May, government data showed on Monday.
The benchmark Nikkei is expected to move between 9,750 and 9,950, with trade likely to be tepid after Wall Street ended flat following a late rally and the trading day possibly starting with a slight dip. It closed at 9,865.63 on Monday.
Nikkei futures traded in Chicago finished nearly flat at 9,860 against the Osaka close of 9,850. STOCKS TO WATCH
-- Astellas Pharma Inc
Astellas, Japan's second-largest drugmaker, plans to retire 28 million treasury shares later this month and increase its stock dividend by 5 yen in fiscal 2009, the Nikkei business daily reported.
-- Toyota Motor Corp
Toyota is considering issuing up to 100 billion yen in straight bonds and is gauging investor demand via Nomura Securities Co and other lead managers, the Nikkei business daily reported. (Reporting by Elaine Lies; Editing by Chris Gallagher)