* NEC, Orix gain after giving forecasts for FY 2012
* Nikkei may be heading for a correction at the end of May -analyst
* Short- and long-term moving averages both rising
* Foreigners net buyers for 26 consecutive weeks
* Nikkei at 10,000 would be too expensive for now - analysts
By Ayai Tomisawa and Antoni Slodkowski
TOKYO, May 11 (Reuters) - Japan's Nikkei rose on Wednesday, boosted by gains in companies that provided positive outlooks for the current business year such as Orix Corp and NEC Corp , while investors largely shrugged off slightly stronger-than-expected inflation data from China.
The market was also bolstered by resilient commodity shares, which held on to early gains despite a brief drop in brent crude prices after output and loan data from the world's second-largest economy hinted at slowing demand.
China's headline consumer price inflation slowed to 5.3 percent in the year to April from 5.4 percent in March, the National Bureau of Statistics said on Wednesday, although that was still higher than expected. [ID:nL3E7GB06W]
"Tokyo shares didn't react badly after the data, but worries over further cooling in China, which is a huge market for many Nikkei-listed firms, will likely keep a lid on further gains," said Norihiro Fujito, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
"The Nikkei may be heading for a correction towards the end of May, which is when hedge funds reshuffle their portfolios after mid-year earnings reports, and if we see further unwinding in commodities markets," Fujito said, adding that the Nikkei may temporarily dip below 9,500.
Despite gains in the Nikkei, trading was subdued with investors cautious ahead of Toyota Motor Corp's full-year earnings release after the closing bell.
Market analysts said some investors may try chasing the market higher to 10,000 points but profit-taking by life insurers is likely to kick in if and when it touches that level.
"The mood is not too bad after corporate earnings results. But with a lot of companies deciding not to release full-year forecasts, there isn't much to justify further gains," said Hideyuki Okoshi, general manager at Chibagin Securities.
He said the Nikkei may try to reach key psychological resistance at 10,000 but it may not be able to stay there unless there are favourable indications on how companies performed in the first quarter.
Another trader at a Japanese brokerage said that while foreigners have bought Japanese stocks below 10,000, sell orders are seen above that level.
By mid-afternoon the benchmark Nikkei average had risen 0.4 percent to 9,862.06, while the broader Topix gained 0.2 percent to 858.41.
The Nikkei hovered above its 200-day moving average, now at 9,823, which has become an immediate support level.
Volume was moderate, with 928 million shares changing hands on the Tokyo Stock Exchange's main board by the midday break. It was poised to post daily volume around Tuesday's 1.90 billion shares.
GOLD UP
Japanese shares have dropped about 5 percent since the March 11 quake, while Asian stocks outside Japan have gained about 8 percent in the last two months.
Analysts added that while both the Nikkei's 25-day and 200-day moving averages are gradually rising, suggesting an upward trend in the market, investors remain cautious about chasing the index higher.
"Foreigners are buying, but they are still looking for fundamental reasons to invest in Japan," said Hiroichi Nishi, general manager at SMBC Nikko Securities.
Foreigners have been net buyers of Japanese stocks for the past 26 weeks, according to data released by the TSE, encouraged by strength in overseas equities.
Commodity shares such as oil stocks and mining shares outperformed on rising oil and gold prices.
Inpex added 0.9 percent to 583,000 yen and Japan Petroleum Exploration rose 1.6 percent to 3,930 yen.
Japanese truckmaker Isuzu Motors gained 4.3 percent
to 364 yen on news that it and Volkswagen AG
Shares in NEC Corp soared 5.9 percent to 179 yen after the firm forecast a 56 percent rise in operating profit to 90 billion yen in the business year to March 2012, beating an average estimate of 69.7 billion yen from six analysts who had updated their forecasts in the last 30 days, according to Thomson Reuters I/B/E/S.
Orix Corp gained 3.9 percent to 8,010 yen in active trade after the company forecast its net profit for the current business year to March 2012 will rise 15 percent to 77.5 billion yen ($959 million).
That was slightly lower than the 81 billion yen predicted by the Thomson Reuters Starmine SmartEstimate, which places more weight on recent forecasts by top-ranked analysts, although the majority of them did not update their estimates after the March 11 earthquake. (Additional reporting by Antoni Slodkowski; Editing by Edmund Klamann)