Nikkei edges higher in cautious trade ahead of earnings, Fed outcome
* Nikkei rises 0.2 pct, Topix up 0.5 pct
* Yen resumes its downward slide against dollar
* Exporters lead gains
* Nikkei seen in bearish bias in midterm - fund manager
TOKYO, July 30 (Reuters) - Japan's Nikkei average on Tuesday rebounded from a one-month low after the yen resumed its downward slide to the dollar, but many investors remained on the slidelines ahead of the peak of the earnings season and the outcome of a U.S. Federal Reserve meeting. The benchmark Nikkei rose 0.2 percent to 13,684.99 in midmorning trade, after opening slightly lower, while the broader Topix gained 0.5 percent to 1,134.00. "Although the market is seeing a technical rebound, there are few factors to buy shares at the moment," said Yasuo Sakuma, portfolio manager at Bayview Asset Management. "I suspect that foreign investors were unwinding a large buildup of their positions in Nikkei futures." Sakuma said if the government fails to raise the sales tax rate as planned, it will be a big disappointment for foreign investors, who have been the main buyers of Japanese equities. "I think the Nikkei may remain in bearish bias in the next few months." Despite holding the strongest political mandate of any Japanese prime minister in years, there are signs Shinzo Abe is seriously rethinking the plan out of concern it could derail a nascent economic recovery he has crafted with an aggressive policy mix of fiscal and monetary stimulus, dubbed Abenomics.
However, Abe risks upsetting the markets by giving the appearance of backtracking on promised reform. On Tuesday, the Nikkei tumbled 3.3 percent to its lowest close since June 27, breaking below its 25 and 75 day moving averages on the same day. The benchmark has fallen 7.6 percent over the last four sessions, but is still up 11 percent since April 4, when the Bank of Japan unveiled sweeping stimulus measures to jump-start the moribund economy and end years of stubborn deflation. The market is up 32 percent this year, underpinned by Abenomics. The dollar last traded at 98.10 yen, moving away from its nearly one-month low of 97.61 yen touched on Monday, after data released early on Tuesday showed Japanese industrial output fell for the first time in five months in June. A weaker yen tends to make export-reliant Japan's products more competitive in the global market. Exporters rose, with Sony Corp up 3 percent, Toyota Motor Corp 1.7 percent higher, and Olympus Corp up 4.6 percent. On the downside, Hitachi Construction Machinery Co tumbled 5.5 percent after the construction machinery maker said its operating profit dropped 27.9 percent for the April-June quarter. Analysts also said that investors are reluctant to take positions before key economic events at home and abroad this week, such as the peak of the corporate earnings season, the outcome of a Federal Reserve meeting and Chinese manufacturing data. On Tuesday, companies including Hitachi Ltd, Kawasaki Heavy Industries Ltd, Tokyo Electron Ltd , All Nippon Airways Co Ltd and KDDI Corp will report their first-quarter results. In the United States, market participants will scrutinize the Federal Open Market Committee policy statement this Wednesday for any additional clues about the Fed's intended timeline for scaling back its quantitative easing. Speculation the Fed might start to trim its stimulus in September and slowing growth in China, Japan's second biggest export market, have roiled global markets in recent months.