By Stanley White
TOKYO, Oct 10 (Reuters) - Japanese stocks bounced back from early losses to end higher on Thursday, helped by a flush of optimism over chances that the United States and China can scale back their trade war at high-level talks set for later in the day.
The Nikkei index ended up 0.45% at 21,551.98, after shedding as much as 0.7% earlier in the day.
Japanese shares were boosted by a New York Times report that U.S. President Donald Trump's administration will soon issue licences allowing some U.S. companies to supply non-sensitive goods to Chinese telecommunications equipment maker Huawei Technologies Co Ltd HWT.UL . could be seen as a concession to China that would make it easier to resolve the trade row.
Trump's administration effectively blacklisted Huawei in mid-May, alleging it is involved in activities that compromise national security, a charge the company denies.
Analysts, however, caution that a resolution to the bruising year-long trade war is far from certain, and that global supply chains are already shifting in response to the fraught relationship between the world's two-largest economies.
"The belief in the markets right now is supporting stocks and is a positive for Japanese exporters, because they ship a lot of goods to manufacturers in China," said Daiju Aoki, regional chief investment officer for Japan at UBS Securities.
"But the problem is that manufacturers are shifting production out of China, so in the long term Japan's manufacturers won't benefit as much."
Japanese shares started on the back foot after a South China Morning Post report spread pessimism over prospects for the trade talks. tariff war has raged for 15 months, and without significant progress, the United States is set to hike the tariff rate on $250 billion worth of Chinese goods to 30% from 25% next Tuesday.
In Japan, there were 141 advancers on the Nikkei index against 80 decliners on Thursday.
The broader Topix index .TOPX ended down 0.02% at 1,581.42.
The volume of shares traded on the Tokyo Stock Exchange's main board .TOPX was 0.92 billion, compared to the average 1.21 billion yen in the past 30 days. (Editing by Subhranshu Sahu; Editing by Simon Cameron-Moore)
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