Tokyo: Nikkei stock average rallied on Wednesday, reversing earlier losses as the yen fell from a 15-year high versus the dollar after Japan intervened to curb a rise in the yen that is threatening its export-reliant economy.

Japan's intervention in the foreign exchange market, its first in six years, sent short-term speculators scurrying to cover short positions in stock futures, lifting the Nikkei to a one-month intraday high, market players said.

"The key points for the stock market going forward are if the Nikkei can remain on an uptrend once the short-covering in futures peters out," said Yutaka Miura, a senior technical analyst at Mizuho Securities.

"That in turn may depend on whether the yen remains on a weaker footing. The point here is that the yen hasn't strengthened on domestic factors alone - the easing stance by the United States and low US yields have played a key part as well."

The dollar traded at 84.61 yen after hitting a 15-year low of 82.87 yen on trading platform EBS. That earlier rise in the yen followed a Japan ruling party vote victory on Tuesday by Prime Minister Naoto Kan over heavyweight Ichiro Ozawa, who had been more strident in his calls to intervene to weaken the yen.

The dollar hit a record low of 79.95 yen in 1995. Focus was on how long Japan, which indicated that it had intervened alone, can keep a lid on the yen.

"The market was surprised by the intervention as many market participants had expected the Kan government may not be able to act flexibly in the currency market. The intervention can buy time, but the government simply can't intervene heavily for a long time as its effect will run out quickly," said Masaru Hamasaki, a senior strategist at Toyota Asset Management.

"Along with the intervention, the government needs to come up with distinct policies to stem the yen's rise and boost the domestic economy. Otherwise, the yen could start firming quickly and share prices could come under pressure again."

The benchmark Nikkei gained 2.9 per cent to 9,572.56, after having dropped as low as 9,199.08. The broader Topix rose 2.3 per cent to 854.00.

Reach for the cloud

The Nikkei was looking bullish on the technical charts, having risen above resistance at 9,455 roughly around its 75-day moving average and previously considered a strong resistance point.

The next resistance is seen around 9,500 the bottom of its Ichimoku cloud. Ichimoku charts are popular with Japanese traders.

Shares of exporters, which had been dogged by the yen's recent strength, snapped back from earlier losses and gained, with Sony Corp rising 2.4 per cent to 2,553 yen after losing as much as 2.4 per cent.

Electronics parts maker Kyocera Corp gained 1.8 per cent to 8,000 yen.