* Nikkei up 0.4 pct but broader Topix down 0.4 pct
* Large cap shares underperform on profit-taking
* Impact of yuan change may subside soon
By Hideyuki Sano
TOKYO, Aug 13 (Reuters) - Japan's Nikkei share average rose but the broader Topix index fell on Thursday as confused investors shed risk assets while trying to gauge how much the yuan will fall and how that would affect Japanese companies' bottom lines.
The Nikkei rose 0.4 percent to 20,478 thanks to gains in some of its heavyweights but the Topix fell 0.4 percent to 1,659.53 as investors booked profits in large cap shares, such as banks and telecom companies.
"Many people were surprised by China's moves, and they were selling shares to avoid uncertainties, not because of logical worries over the impact of a lower yuan," said Takashi Hiroki, chief strategist at Monex Securities.
"After all, a four percentage point move in an exchange rate would become a surprise only when you have a fixed rate. If a free-floating currency moves that much, the reaction would have been different."
China guided the yuan lower for a third day on Thursday, and it started the day 0.2 percent below Wednesday's local close.
The yuan has fallen 3.5 percent so far this week.
The unexpected yuan changes "raised concerns that profits in China could fall when converted to the yen and also fear the Chinese economy might be in such a shape as to need a currency devaluation," said Kenji Abe, chief equity strategist at Bank of America Merrill Lynch.
"But the impact of the fall in the yuan on the Japanese economy should not be that big. So I expect the Tokyo stocks to stabilise soon."
Concerns about the Chinese economy helped to drive the Nikkei down to two-week lows on Wednesday.
But it managed to recover on Thursday, helped by a 1.8 percent gain in its heavyweight Fast Retailing, which rebounded after a two-week downtrend.
A few other Nikkei heavyweights provided a boost, including Trend Micro, which rose 4.8 percent after earnings.
But the broader market remained listless, with big cap shares hit the hardest.
The Topix core 30 fell 0.8 percent as bank share fell sharply. SMFG fell 2.6 percent while Mitsubishi UFJ dropped 1.7 percent.
Investors also took profits in telecom shares, which had become a bit of safe haven.
NTT, which hit a 15-year high earlier this month, fell 0.9 percent while KDDI, at a record high on Tuesday, fell 1.2 percent.
Softbank fell 3.0 percent due to disappointing earnings from Alibaba, in which it has a large stake. (Editing by Richard Borsuk)