Strong U.S. data helps Nikkei edge away from 3-week low

* Softbank up on eAccess purchase

* More firms cut forecasts, adding to growth concerns

* U.S. manufacturing data fuels gains

* Shippers recover as price hikes signalled - source

By Sophie Knight

TOKYO, Oct 2 (Reuters) - Japan's Nikkei share average inched up on Tuesday morning, buoyed by a surprisingly strong pick-up in U.S. manufacturing as well as gains for Softbank Corp after its purchase of a rival to boost its network capacity.

However, the benchmark's gains were capped as investors remained cautious after a handful of companies undershot guidance or cut forecasts, reinforcing fears about slowing global growth.

The Nikkei inched up 21.8 points, or 0.3 percent to 8,818.38 by the midday break, with a softer yen helping exporters such as Canon Inc

up, but the index held below its 75-day moving average at 8,869.61. Softbank

was up 1.8 percent after rising as much as 4.7 percent after the mobile operator said it would acquire smaller rival eAccess Ltd

in a $1.84 billion deal, stepping up a fight for market share with competitor KDDI Corp . eAccess was untraded with a glut of buy orders by mid-morning, while KDDI lost 2.5 percent.

Softbank's popularity with investors - the stock is up 39 percent on the year - partly derives from its low exposure to a strong yen that is eroding overseas revenues and prompting profit warnings from exporters.

"It's going to be a shockingly difficult earnings season to trade... downward revisions are going to come in thick and fast and people are rapidly pricing them in," said a senior trader at a foreign bank.

Shimamura Co Ltd

fell 4.1 percent after the clothing store chain reported a 3.9 percent drop in second-quarter earnings ended Aug. 20 compared with a year earlier, due to higher costs.

Alps Electric Co Ltd

slumped 12.2 percent to a three-year low after the electronic parts maker cut its operating profit forecast by 46 percent to 11.8 billion yen ($151 million) for the business year ending in March, citing higher material costs and a strong yen.

Shipping company Mitsui O.S.K Lines Ltd

also

revised its forecast for the 6 months ending Sept. 30 to an operating loss of 3.5 billion yen ($44.8 million) from a previous forecast for a 1 billion yen profit, hurt by rising fuel costs and dwindling demand.

However, the stock rose 6.7 percent as competitors Nippon Yusen KK

and Kawasaki Kisen Kaisha Ltd

also

rose 6.6 and 4.4 percent, respectively, with a trader citing campaigns for higher prices in the industry from other shippers.

The shipping sector gained 5.9 percent after dropping 4.3 percent on Monday.

"We are expecting bad news for exporters and cyclicals and quite strong performance from domestically oriented stocks, so unless the latter dazzle they're not going to gain," Hirokazu Fujiki, manager of investment strategy at Okasan Securities.

Convenience store operators were a case in point, starting the session weak despite the Nikkei business daily reporting record profits for the half, with year-on-year increases of between 3 to 6 percent. Lawson Inc

and Familymart Co

slipped 1.9 and 2 percent, respectively.

The broader Topix

rose 1.8 percent to 724.14 in thin trade, with volume at just 41.8 percent of its 90-day average. CHINA WORRIES REMAIN

Investors are also concerned that corporate earnings will be hit by the closure of some Japanese factories and stores in China due to anti-Japan sentiment triggered by a territorial dispute, a double whammy for firms already suffering from diminishing demand in China and elsewhere.

"The risk that anti-Japan demos are going to continue is a reason for people to pull money out of Japan full stop and put it into the U.S.," the trader said, noting that recent stateside data has beaten both expectations and economic readings elsewhere.

U.S. manufacturing expanded more than expected in September, with the ISM index rising to 51.5 from 49.6 in August, beating expectations for a reading of 49.7, according to a Reuters poll.

The Nikkei is currently trailing gains in U.S. stocks, with a 4.3 percent gain on the year compared to the S&P 500's

14.9 percent rise so far. ($1 = 78.0600 Japanese yen)

(Additional reporting by Dominic Lau; Editing by Kim Coghill)

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Keywords: MARKETS JAPAN STOCKS/