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TOKYO, Sept 3 (Reuters) - Japanese stocks rose on Thursday as bargain hunters picked up shares which have been battered for weeks by fears of a China-led global slowdown.
Overnight gains on Wall Street and a market holiday in China also helped support sentiment, but volatility remained high, suggesting investors remain on edge.
The Nikkei share average edged up 0.5 percent to 18,182.39 points, snapping a three-day losing streak that knocked 5.4 percent off of the benchmark index by the end of trading on Wednesday.
The 18,000 mark is considered by traders to be attractive to pension funds and retail investors.
With China on holiday for the rest of the week, market players will now focus on U.S. non-farm payroll data on Friday for clues on whether the U.S. Federal Reserve might raise interest rates for the first time since 2006 at its September 16-17 meeting.
"U.S. private sector employment data was just strong enough to give the expectation that non-farm payrolls shouldn't be a shock in either direction," said Nicholas Smith, a strategist at CLSA.
"Still, markets are in a state of caution because the question of how Friday's data will impact U.S. policy is on everyone's mind. Japanese policymakers are nervous because they can't do anything until it's clear what the Fed will do, which has kept investors on edge."
A weakening yen also helped boost shares of Japan's major exporters. Investors had feared continued strength in the yen after it 116 against the dollar last week.
Toyota Motor Corp. shares climbed 2.4 percent and Nissan Motor Co. gained 1.3 percent.
Toshiba shares gained 2.1 percent after the Yomiuri newspaper said the company will likely report long-delayed earnings as early as this week. The company has twice postponed releasing its earnings for the 2014-15 financial year amid a probe into improper accounting.
NTT Docomo jumped 4.4 percent after Barclays upgraded its stock to 'overweight' from 'under weight' and raised its target price to 3,000 yen from 2,200 yen.
The Nikkei volatility index fell 3.8 percent, but remained high at 35.7 percent.
The broader Topix rose 0.6 percent to 1,474.98, closing with 19 of its 33 subsectors in positive territory. Its Insurance subsector led the day with a gain of 2.8 percent.
The JPX-Nikkei Index 400 gained 0.6 percent to 13,246.79. ($1 = 120.0500 yen) (Additional reporting by Ayai Tomisawa; Editing by Kim Coghill)