* Nikkei edges up on short-covering but yen caps topside
* Mazda eases on news Ford to sell most of its Mazda shares
By Chikafumi Hodo
TOKYO, Oct 18 (Reuters) - Japan's Nikkei average edged up on Monday on short-covering after losing nearly 1 percent the previous session, but gains were limited as the yen stayed near a 15-year high against the dollar.
The market struggled to find clear direction due to a dearth of immediate market-moving incentives, with investors looking to take cues from the Group of 20 nations meeting later in the week and the Federal Reserve's monetary policy early next month.
Shares of Mazda Motor Corp erased early losses to close the morning session down 0.5 percent at 213 yen after a source with knowledge of the matter said Ford Motor Co was planning to sell almost all its remaining stake in the Japanese auto company.
Mazda shares dropped to as low as 204 yen on the day.
"The Nikkei rebounded on short-covering after last week's loss but the market is having difficulty finding clear direction without any new incentives," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.
The benchmark Nikkei closed the morning session up 0.5 percent, or 47.41 points, at 9,547.66.
The broader Topix rose 0.9 percent to 833.84.
The Nikkei drew support from the Nasdaq, which rose more than 1 percent as Google surged after blowout third quarter results on Friday, but traders were expected to be careful about chasing Japanese shares on rallies as the yen remained strong.
The yen inched up to 81.30 against the dollar, holding near a 15-year high of 80.88 reached on the EBS platform last week.
Traders were reluctant to take large fresh positions due to a lack of trading factors.
"The Nikkei is likely to trade in a narrow band around 9,500. The focus is on the yen but the forex market is expected to be nervous ahead of the G20 meeting this weekend," said Masayoshi Yano, a senior market analyst at Meiwa Securities.
Other traders said the strength of the yen has been having a limited impact on Japanese shares as the Nikkei has been performing relatively well despite the yen's rise.
"Basically, foreign funds are flowing into Japan given the current ample liquidity situation in global markets," said Ryosuke Okazaki, chief investment officer at ITC Investment Partners Corp.
"Japanese shares have lagged behind others, but they are now starting to catch up despite the yen's strength against the dollar. Some shares are rising as the yen is strong against the dollar, but not necessarily strong versus the euro."
In individual shares, Mazda's fall was seen having only a limited effect on the broader stockmarket.
"The Mazda news is not having an impact on prices overall as it was not a big surprise to the market," Yamagishi said.
Shares of Toyota Motor gained 1.9 percent to 2,948 yen on Monday after the Asahi newspaper reported on Saturday the world's largest carmaker is considering building its second car plant in Mexico to boost local output due to the yen's strength. (Reporting by Chikafumi Hodo; Editing by Joseph Radford)