TOKYO, Dec 2 (Reuters) - Japanese stocks were basically flat in choppy trade on Wednesday morning as investors shunned risk, but the benchmark Nikkei average held above the 20,000 point level that it crossed for the first time in more than three months a day earlier.
The Nikkei share average edged down 0.1 percent to end the morning session at 20,002.12, conceeding little of the 1.3 percent it gained the previous day.
Cash equities experienced an aggressive ramp at the close of Tuesday's session, pushing the Nikkei above 20,000 points, but market participants said macro sentiment and risk appetite were cooled a little overnight by a slight strengthening of the yen against the dollar.
"The movement has been a bit choppy and a little bit disconnected during these past few days, partly because of the recent holidays and partly because of end-of-month related activity" said Stefan Worrall, director of Japan equity sales at Credit Suisse.
"We have had a fairly susbstantial recovery since the end of September, but the market is still in a state of anticipation ahead of the FOMC. We've been in rehearsal mode for a long time and it's created a huge amount of nervousness and volatility, but now it's showtime."
Sharp Corp climbed 4.8 percent after Japan's Yomiuri newspaper reported that a state-backed fund is considering buying a majority stake in the company for an estimated 200 billion yen ($1.63 billion).
Sectors with significant domestic exposure outperformed as investors looked to defensive, risk-off positions in the short-term. The Topix subindex for construction shares added 1.5 percent in midmorning trade. The sector was led by commercial builder Tokyu Construction Co Ltd, which rose 5.3 percent.
"It could be that we're seeing some restraint now because of sentiment surrounding expectations for the yen as we move into next year," said Gavin Parry, managing director of Parry International Trading.
"GPIF (a government pension fund) came out and said they are re-instating hedging, which has some people wondering whether they are expecting to take further hits from yen strength in the future. We're also seeing some of the big brokerages marking up their cost projections for the yen moving into next year."
Electric and gas shares gained 1.3 percent and pharmaceuticals also outperformed, rising 0.8 percent.
The broader Topix edged up 0.3 percent to 1,607.27 and the JPX-Nikkei Index 400 rose 0.3 percent to 14,479.20. ($1 = 122.9300 yen) (Reporting by Joshua Hunt; Editing by Eric Meijer)