Japan's Nikkei average was flat on Wednesday, with exporters gaining after stronger-than expected machinery

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orders data, but recall-hit Toyota Motor Corp fell after an incident involving a Prius in the United States.

Data released just before the start of trade showed that Japan's core machinery orders fell 3.7 percent in January from the previous month, smaller than a median market forecast for a 4.1 percent fall.

"Investors took heart from the machinery data, which pointed to growth led by overseas demand, while they've become hopeful about China's trade data due later in the day," said Yumi Nishimura, deputy general manager at Daiwa Securities Capital Markets.

"The incident in America is taken as negative for Toyota as it has yet to completely resolve its recall problems."

The benchmark Nikkei fell 8.60 points to 10,559.05 by midday, after inching down 0.2 percent the previous day.

The broader Topix fell 0.2 percent to 922.76.

Wednesday marks a year since the benchmark Nikkei posted a 26-year closing low of 7,054.98, from which it has now recovered about 50 percent as stimulus measures by governments around the world have helped economies to get on a recovery track. It hit a 26-year intraday low in October 2008 of 6,994.90.

Buying by foreign investors has also supported Japanese stocks since late last year, and on Wednesday orders placed through 10 securities houses before the start of trade showed foreign investors were set to buy Japanese stocks to the tune of 2.4 million shares.

"Money from overseas has been flowing into the Japanese market since late last year and that's providing solid support," said Hajime Nakajima, deputy general manager at Cosmo Securities.

"There's a sense of comfort in stocks here because Japan is relatively risk-free. But given the global macro situation, including credit worries in Europe, it'll take a while until investors actually place Japan above 'neutral' in their portfolios."

TOYOTA FALLS

Toyota shares slipped 1.3 percent to 3,450 yen after news that it and U.S. safety regulators sent investigators to San Diego on Tuesday to inspect a Prius hybrid that sped out of control on a California freeway a day earlier.

The fall in Toyota's shares also came after the carmaker said it would fix all 2000 to 2003 model Tundra pickups sold in the United States due to a risk that part of the truck's frame could corrode, causing spare tyres or the gasoline tank to fall off.

Other exporters gained, helped by a halt in the yen's advance against the dollar. Investors fret about a stronger yen as it eats into exporters' overseas profits when repatriated. The dollar was steady around 90 yen .

Sony Corp rose 1.1 percent to 3,365 yen and Canon Inc added 0.6 percent to 3,990 yen. Kyocera Corp gained 1 percent to 8,540 yen.

Stainless steel maker Nisshin Steel shot up 8.1 percent to 188 yen after news on Tuesday that it will be added to the Nikkei average on March 29.