* Nikkei cuts losses to 0.2 pct as short-covering emerges
* Trade thin, investors looking for fresh incentives
* JAL up on view stock fell too far last week
By Elaine Lies
TOKYO, Oct 19 (Reuters) - Japan's Nikkei stock average fell 0.2 percent on Monday, with exporters such as Kyocera Corp down after disappointing U.S. corporate earnings robbed the market of upward momentum sparked by earlier upbeat results.
But the benchmark pared most of its losses in late trade as short-covering emerged and most other Asian share markets rose, while struggling Japan Airlines Corp surged 11.9 percent after losing 26 percent of its value last week, staging what market players said was a rebound on a sense the stock had fallen too far.
Gains in a number of other Asian share markets also gave the Nikkei a boost amid a dearth of trading incentives before Japan's earnings season begins later this month, market players said.
"Overall, global stock markets are doing well and the yen's retreat against the dollar compared to last week's levels is contributing to a good environment for the Nikkei," said Noritsugu Hirakawa, a strategist at Okasan Securities.
In thin trade, the benchmark Nikkei lost 21.05 points to 10,236.51 after earlier falling as much as 1.3 percent. The broader Topix rose 0.5 percent to 905.80. "Basically activity today is dominated by short-term traders, who are buying on dips after selling at the highs. The market is also paring its losses in tandem with movements in the rest of Asia," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.
The MSCI index of Asia-Pacific shares outside Japan was flat in late afternoon, with most Asian markets in positive territory.
But investors were wary of buying actively in the wake of Wall Street falls on Friday after disappointing results from General Electric Co and Bank of America Corp demonstrated the road to economic recovery will be bumpy.
Additional pressure came from a report showing that U.S. consumer sentiment fell unexpectedly in October, tempering optimism inspired by news of a rise in industrial production in September and reinforcing views that the U.S. economic recovery still faces some large hurdles.
EYES ON EARNINGS, JAL
"In addition, there's been a tendency for U.S. shares to fall after results come out even if the figures aren't so bad, partly on profit-taking after rising on expectations and partly on the 'sell on the fact' idea," said Yutaka Miura, chief technical analyst at Mizuho Securities. "People also fear this could happen in Japan."
JAL rose to 113 yen, though market players warned these gains could well be temporary in the face of the company's challenges. The Sankei newspaper reported on Sunday that the Japanese government task force set up to keep JAL afloat has decided to tap a state-backed institution tasked with revitalising struggling companies.
"There's a lot of problems such as the cost cuts that are being demanded in areas such as pay and pensions, and since this doesn't just affect current JAL employees but its pensioners, the issues have deep roots and will take quite a long time to resolve," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.
Banks, battered on Friday, also rose, with top bank Mitsubishi UFJ Financial Group up 2.1 percent to 480 yen and Mizuho Financial Group gaining 2.3 percent to 176 yen.
But Fast Retailing, owner of the Uniqlo casual-clothing chain, fell 3.7 percent to 14,750 yen after JP Morgan cut its rating on the stock to "underweight" from "neutral," citing its recent sharp gains.
Casio Computer Co shares fell 9 percent to 692 yen after it lowered its outlook for the year to March to an operating loss of 5 billion yen ($55 million) from its previous forecast for a 15 billion yen profit.
Casio cited a bigger-than-expected fall in sales of its mobile phones and digital cameras.
Trade was light on the Tokyo exchange's first section, with 1.9 billion shares changing hands, compared with last week's daily average of 2 billion.
Advancing stocks outnumbered declining ones by nearly 2 to 1. (Reporting by Elaine Lies; Editing by Joseph Radford)