* Foreign holdings of Japan stocks fall in latest fiscal year
* Drugmaker Daiichi Sankyo soars on share buyback plan
By Ayai Tomisawa
TOKYO, June 21 (Reuters) - Japan's Nikkei share average edged up on Tuesday morning in choppy trade, but gains from hopes Britain will stay in the European Union were limited as many investors steered from risk amid currency market volatility.
The Nikkei rose 0.5 percent to 16,050.97 in midmorning trade after traversing positive and negative territory.
While expectations Britain will stay in the EU in Thursday's referendum supported sentiment, the chance U.S. Federal Reserve Chair Janet Yellen will make dovish comments later on Tuesday weighed on the dollar against the yen. The yen stood at 103.88 to the dollar, near its 22-month high of 103.555 set last Thursday.
"With Yellen's congressional testimony and the UK referendum on our doorstep, markets all around are exercising caution," said Andrew Meredith, co-managing director at Tyton Capital Advisors.
Bookmakers' odds have shown "Remain" gaining traction, with Betfair putting the implied probability of such an outcome at 72 percent on Monday, up from 60-67 percent on Friday.
Shares of Japanese exporters were mixed, with Toyota Motor Corp and Honda Motor Co flat and Tokyo Electron Ltd rising 1.4 percent.
Daiichi Sankyo Co soared 8.3 percent after the drugmaker said it plans to buy back up to 28 million of its own shares, or 4.1 percent outstanding, worth 50 billion yen.
Meanwhile, exchange data released on Monday showed foreign ownership of Japanese stocks fell during the latest fiscal year. At the end of March, foreigners owned 29.8 percent of shares, down 1.9 points from a year earlier. It was the first decline in four years, the exchange said.
Traders said that worries about fiscal reconstruction and lack of fundamentals have forced foreign investors to reassess the risks of investing in Japanese stocks.
"The magic of 'Abenomics' has faded as the weak yen trend and hopes for stronger corporate profits are gone," said Takuya Takahashi, a strategist at Daiwa Securities.
He added that the optimism stirred by Prime Minister Shinzo Abe's policy started in December 2012 has failed to keep foreigners attracted to Japanese equities.
The broader Topix gained 0.5 percent to 1,285.45 and the JPX-Nikkei Index 400 added 0.5 percent to 11,588.20. (Editing by Richard Borsuk)