Tokyo's Nikkei average ended little changed on Wednesday after a slew of brokerage upgrades spurred late buying in Sony Corp and other technology shares, offsetting worries about the strong yen and falls on Wall Street.
Traders also noted that Nasdaq futures traded on Globex were picking up amid speculation that US technology leader Intel Corp would post strong earnings on Wednesday.
The Nikkei average ended up 0.12 percent at 10,863.00 after falling as low as 10,730.45.
But the TOPIX index of all first-section issues edged down 0.04 percent to 1,057.95 and the number of shares that fell outnumbered gainers by 719 to 670.
"Digital home electronics is a key theme for the market this year and investors, including us, expect companies' profits to be boosted accordingly," said Takashi Miyazaki, a senior strategist at UFJ Partners Asset Management. "The only concern is the strong yen," he added.
The yen stood at 106.20 per dollar late on Wednesday, not far below a recently hit three-year high.
Sony Corp got a boost from Goldman Sachs, which raised its rating on the company to "outperform" from "in-line", citing decent Christmas sales and expected growth in digital electronics products.
Sony has under-performed its rivals since it posted a hefty quarterly loss last April but it has risen 7.3 percent since the beginning of December when the recent rally in the sector started, in line with a 7.7-percent rise in the electronics machinery index
The stock closed up 3.82 percent at 4,080 yen on Wednesday, still 20 percent below its 2003 high of 5,130 yen set in January.
Shares in Sharp Corp, which holds nearly 40 percent of the global liquid crystal display (LCD) television market, were upgraded by Nomura Securities and closed up 1.7 percent at 1,855 yen after touching a two-and-a-half-year high of 1,874 yen.
Nomura also upped its rating on Matsushita Electric Industrial Co Ltd, sending the shares up 0.58 percent to 1,554.
Shares in Sanyo Electric Co climbed 1.2 percent to 589 yen after it unveiled a global digital camera sales target of 300 billion yen in 2005/06, up from an estimated 200 billion yen for the current year through March.
Miyazaki of UFJ Partners Asset Management said it would be difficult for technology shares alone to lead the Japanese market and that investors would start shopping around in other sectors that have suffered during Japan's prolonged economic slump.
In fact, the real estate index rose 2.26 percent on Wednesday and was the market's second best performer.
Mitsubishi Motors Corp slipped 3.08 percent to 252 yen on dilution concerns after a report that the nation's fourth-biggest auto maker was considering issuing 100 billion yen ($941 million) in new shares to DaimlerChrysler AG, Mitsubishi Heavy Industries Ltd and Mitsubishi Corp.
The shares had been strong since DaimlerChrysler said last Thursday that it might support the restructuring auto maker.