* Fed's view on economy, exit strategy provide relief
* Kawasaki Heavy, train makers surge on Vietnam train report
* Market trend upward but investors still cautious
By Aiko Hayashi
TOKYO, Aug 13 (Reuters) - Japan's Nikkei average rose 0.7 percent on Thursday, lifted by exporters such as Advantest Corp, with investors relieved after the Federal Reserve suggested the U.S. economy is through the worst of the recession.
Kawasaki Heavy, which makes railway rolling stock, and other companies involved in making trains surged on a report that Vietnam will use Japan's bullet train technology in building its high-speed railway system.
Market players said the market welcomed few surprises in the Fed's closely watched exit strategy, in which it will continue to stick to its current measures, but added that trade remained cautious.
"Market sentiment has warmed up but it is not as if investors are gung-ho bullish. They are still a bit jittery," said Junichi Misawa, senior fund manager at STB Asset Management.
"Stocks appear to be overvalued considering the current level of corporate earnings but I believe that sentiment as it is right now is indicative of a long-lasting run-up."
The Fed said the economy was levelling out, and it left interest rates unchanged at the end of its two-day policy meeting on Wednesday.
It also said it would extend by one month through October the duration of a programme to buy long-term government securities but would not increase the amount of purchases.
In thin trade, the benchmark Nikkei added 76.14 points to 10,511.14. It slipped 1.4 percent the previous day after rising to a 10-month high of 10,587.36 on Tuesday.
The broader Topix rose 0.7 percent to 966.73.
Analysts said the market will be watching moves in Chinese stocks after the Nikkei sped up its losses the previous day, tracking a fall in China on deepening worries about a possible tightening of market liquidity.
KAWASAKI HEAVY, TRAIN MAKERS JUMP
Kawasaki Heavy shot up 6.1 percent to 261 yen, while another rolling stock maker Nippon Sharyo Ltd jumped 5 percent to 629 yen. Kinki Sharyo Co climbed 6.6 percent to 895 yen.
Analysts have said Japan's near-half century experience with its bullet train system puts the country's firms in a strong position to win orders in a global railway investment boom.
High-tech exporters rose, with chip-tester maker Advantest Corp climbing 4.5 percent to 2,340 yen and electronics parts maker Kyocera Corp adding 2.2 percent to 7,810 yen.
Shares of Honda Motor Co advanced 1.6 percent to 3,090 yen and Toyota Motor Corp rose 1.2 percent to 4,080 yen.
Mazda Motor Corp gained 2.3 percent to 262 yen after the Nikkei business daily said the automaker could raise its domestic production outlook for April-September by about 10 percent as stimulus programmes in Japan and abroad boost demand.
Some 870 million shares changed hands on the Tokyo exchange's first section, below last week's morning average of 962 million.
Advancing stocks beat declining ones by more than 3 to 1. (Editing by Edwina Gibbs and Joseph Radford)