* Yen weakness fails to give exporters much of a lift
* Near-term outlook bearish, investor jittery about lost output
* Toshiba down 2.1 pct as Macquarie cuts price target
* Volume lightest since the quake as uncertainties weigh
By Chikafumi Hodo and Antoni Slodkowski
TOKYO, April 7 (Reuters) - Short-covering in energy and domestic-demand stocks gave the Nikkei a gentle nudge higher after two days of declines on Thursday, but trade thinned out with investors jittery ahead of earnings announcements.
Market players said the trend for the next few months is bearish as some firms enter the first earnings season since last month's quake unwilling to give forecasts for this financial year amid power shortages, lost production and little progress by Tokyo Electric in bringing its crippled nuclear plant under control.[ID:nL3E7F7015]
Trading volume fell to its lowest levels since the quake, with day's total number of shares changing hands on the bourse's main board set to come in below 2.0 billion, well below post-quake levels.
"I'm not surprised utilities got sold-off so much as solving electricity problems will weigh heavily on their finances," said Fujito Ando, senior managing director at Chibagin Asset Management.
"But their assets also carry a lot of value, so they're being bought back for now," said Ando.
By midafternoon the benchmark Nikkei average inched up 15.37 points or 0.16 percent to 9,599.97.
The broader Topix index rose 0.3 percent, or 2.46 points, to 842.09.
Many Japanese manufacturers have suffered substantial losses of production after the March 11 quake and tsunami disrupted supply chains. Worries about that impact on earnings have outweighed a recent slide in the Japanese currency to near an 11-month low of 122.55 yen to the euro and a half-year low of 85.54 yen against the dollar .
CORRECTIVE BUYING
Chubu Electric Power Co , Kansai Electric Power Co and the owner of the crippled nuclear power plant Tokyo Electric Power Co were the biggest gainers on the Nikkei and the most actively traded shares.
Chubu and Kansai both had lost around 15 percent since the quake, while Tokyo Electric plummeted 84 percent to hit the record low of 292 yen on Wednesday on worries about a huge compensation claims related to the disaster at its nuclear plant.
"It was about time to see some corrective buying, with investors who have gone short this week covering their positions ahead of tomorrow's SQ," said Takashi Ohba, a senior strategist at Okasan Securities, referring to Friday's settlement of options, known in Japan as the special quotation.
Foreign investors were net buyers of Japanese stocks last week, and local market participants were keen to see if they would continue to buy them in the longer run.
"I think foreigners will continue to be eager to buy Japanese shares on dips, but I doubt that they'll be aggressive about buying them on rallies at a time when there are many uncertainties in the market," Ohba said.
Overseas investors shifted back to net buying of Japanese equities to the tune of 144.7 billion yen ($1.69 billion) in the week to April 2, after having sold a net 13.2 billion yen the prior week, according to data by the Ministry of Finance.
Between March 13 and 19, the week right after the quake and tsunami, foreigners logged record net buying of Japanese equities of more than 890 billion yen.
TOSHIBA DOWN
Shares in electronics conglomerate Toshiba Corp , slipped 2.1 percent to 382 yen after Macquarie Securities cut the firm's target share price to 500 yen from 575 yen after the shares took a hit as the nuclear crisis in Fukushima unfolded, but kept its "outperform" rating.
"We believe that Toshiba's shares have been hit more by an adverse turn in sentiment surrounding the nuclear-related business due to the Fukushima incident, than by any fundamental deterioration in its business," the brokerage's Damian Thong said in a note to clients.
Toshiba is among the 10 biggest post-quake losers out of the 225 Nikkei components, shedding some 24 percent since March 10 -- the day before the quake -- and underperforming the benchmark index, which after three weeks since the disaster still hovers some 8 percent below its early March levels.
Engineers pumped nitrogen gas into a crippled nuclear reactor at the plant on Thursday, trying to prevent an explosive buildup of hydrogen gas, giving some support to TEPCO's stocks. [ID:nL3E7F62A5]
Elsewhere, Elpida Memory jumped 3.2 percent to 1,097 yen after the company said it had developed a 4-gigabit DRAM chip for smart phones, joining bigger rival Samsung Electronics as the only producers of the large capacity power-saving memory chip for smart phones. [ID:nL3E7F63HD]