(Updates to midafternoon)
TOKYO, Dec 3 (Reuters) - The Nikkei average was up 1.7 percent on Wednesday, buoyed by a jump in retailer Seven & I Holdings after a brokerage upgrade, though automakers weighed on the market in the face of a sharp drop in U.S. car sales.
Shares of NTT Data, Japan's largest domestic system integrator, gained also after a brokerage upgrade, while Fast Retailing was swamped with buy orders on robust November same-store sales at its domestic Uniqlo casual clothing chain.
Among automakers, Honda Motor Co dropped to become the top drag on the Nikkei 225 after a report by the Nikkei business daily that it is scaling back its overseas expansion plans.
"Stocks not dependent on spending in the United States and Europe are being picked up as investors screen for companies that will likely book smaller declines in earnings," said Takahiko Murai, general manager of equities at Nozomi Securities.
"Consensus has been built in the market that the U.S. economy won't recover easily -- until late 2009 or early 2010 at the earliest -- despite a raft of measures taken by the government."
The benchmark Nikkei earlier rose over 2 percent. As of 0405 GMT it had added 129.53 points to 7,993.22. It lost 6.4 percent on Tuesday to book a nearly two-week closing low.
The broader Topix gained 1.3 percent to 797.50.
The dollar was trading around 93.51 yen, compared to a five-week low of 92.63 yen hit on trading platform EBS the previous day.
Investors fret over a stronger yen as it curbs exporters' overseas profits when they are repatriated.
U.S. stocks rebounded on optimism after global bellwether General Electric pledged to leave its dividend intact, while financial shares gained on a Federal Reserve move to extend several emergency measures integral to stabilising banks.
Additional encouragement came after U.S. automakers submitted survival plans and a top lawmaker predicted Washington would approve a bailout, saying that bankruptcy was not an option.
DOMESTIC DEMAND RELIANT SHARES IN FAVOUR
Shares of Seven & I shot up 9.2 percent to 2,740 yen after Macquarie Research lifted its rating on the retailer to "outperform" from "neutral", citing strong convenience store sales and solid results at its financial unit.
The stock was the top positive contributor to the Nikkei 225.
Shares of NTT Data, Japan's largest domestic system integrator, climbed 5.2 percent to 345,000 yen to become the second-biggest positive contributor to the Nikkei 225 after Mizuho Securities upgraded the stock to "2" from "3", citing its stable earnings prospects.
Fast Retailing were untraded due to a glut of buy orders at 10,790 yen, up 10.2 percent from Tuesday's close, after it said November same-store sales at its domestic Uniqlo casual clothing chain jumped 32.2 percent from the same month a year earlier, marking the biggest monthly gain since March 2001.
But Honda skidded 5.3 percent to 1,786 yen and Toyota Motor slipped 0.9 percent at 2,800 yen, after U.S. monthly auto sales in November plunged 37 percent to the lowest level since 1982, data showed on Tuesday.
U.S. sales for Toyota dropped 34 percent, Honda fell 32 percent, Ford Motor Co was off 31 percent, Nissan Motor Co tumbled 42.2 percent and Chrysler LLC sales fell 47 percent. (Reporting by Aiko Hayashi; Editing by Michael Watson)