* Nikkei 0.9 pct higher after previous day's 5 pct drop
* Benchmark index helped by short covering
* Toyota, Sony, Keyence rise; Fast Retailing, SoftBank fall
TOKYO, Dec 26 (Reuters) - Japan's Nikkei, which plummetedinto bear market territory the previous day, ended higher afterseesawing on Wednesday, helped by short-covering.
The Nikkei share average .n225 closed 0.89 percent higherat 19,327.06, barely shaking off Tuesday's 5.01 plunge - thesteepest single-day decline in over two years.
The searing sell-off left the benchmark down about 21percent from a 27-year peak scaled in early October, meaningit's still in bear market territory entered during the previoussession.
Nikkei seesawed in afternoon trade, dropping into the redand at one point losing more than 1 percent, before pulling backup in late trading to end the session in positive territory.
The broader Topix .TOPX finished 1.12 percent higher at1,431.47, but remained down 25.1 percent from a high of 1,911.31hit in late January.
Global equity markets are heading into the year-end under aheavy cloud as concerns over economic growth and U.S. politicaluncertainty jangled investor nerves.
A U.S. government shutdown and President Donald Trump'sincreasingly hostile stance towards Federal Reserve ChairmanJerome Powell kept investors well clear of riskier assets.
"For short-term sentiment to improve, it's necessary forDemocrats and Republicans to agree on the budget so that thegovernment shutdown will be lifted," said Yutaka Miura, chieftechnical analyst at Mizuho Securities.
"I think there is a possibility selling (in Japanese stocks)will resume after rebounding once because the uncertainty hasn'tbeen resolved completely yet."
On Wednesday, the Nikkei was helped by short covering, Miurasaid.
Shares of some index heavyweights rebounded, with ToyotaMotor Co 7203.T rising 1.1 percent, Sony Corp6758.T adding2.1 percent, Nintendo7974.T gaining 1.2 percent and factoryautomation maker Keyence up 2.9 percent.
Other index heavyweights fell, however. Fast Retailing9983.T was down 0.9 percent and SoftBank Group9984.T shed1.4 percent.
Exporters got a small boost as the yen moved somewhat off afour-month high against the dollar reached overnight, afterJapan's top currency official said Tokyo stands ready to takenecessary steps if the market becomes too erratic.
Electronics manufacturer Panasonic6752.T gained 2.0percent while construction machinery maker Komatsu6301.T advanced 2.4 percent and factory robot maker Fanuc Ltd6954.T tacked on 1.9 percent.
All but three of the Tokyo Stock Exchange's 33 subsectorswere in positive territory, led by precision machinery .IPRCS.T and air transport .IAIRL.T . (Reporting by Daniel Leussink; Editing by richard Borsuk) ((firstname.lastname@example.org; Twitter: @danielleussink;+81-3-6441-1825; Reuters Messaging:email@example.com))
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