* 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
By Daniel Leussink
TOKYO, Dec 26 (Reuters) - Japan's Nikkei, which plummeted into bear market territory the previous day, ended higher after seesawing on Wednesday, helped by short-covering.
The Nikkei share average closed 0.89 percent higher at 19,327.06, barely shaking off Tuesday's 5.01 plunge - the steepest single-day decline in over two years.
The searing sell-off left the benchmark down about 21 percent from a 27-year peak scaled in early October, meaning it's still in bear market territory entered during the previous session.
Nikkei seesawed in afternoon trade, dropping into the red and at one point losing more than 1 percent, before pulling back up in late trading to end the session in positive territory.
The broader Topix finished 1.12 percent higher at 1,431.47, but remained down 25.1 percent from a high of 1,911.31 hit in late January.
Global equity markets are heading into the year-end under a heavy cloud as concerns over economic growth and U.S. political uncertainty jangled investor nerves.
A U.S. government shutdown and President Donald Trump's increasingly hostile stance towards Federal Reserve Chairman Jerome Powell kept investors well clear of riskier assets.
"For short-term sentiment to improve, it's necessary for Democrats and Republicans to agree on the budget so that the government shutdown will be lifted," said Yutaka Miura, chief technical analyst at Mizuho Securities.
"I think there is a possibility selling (in Japanese stocks) will resume after rebounding once because the uncertainty hasn't been resolved completely yet."
On Wednesday, the Nikkei was helped by short covering, Miura said.
Shares of some index heavyweights rebounded, with Toyota Motor Co rising 1.1 percent, Sony Corp adding 2.1 percent, Nintendo gaining 1.2 percent and factory automation maker Keyence up 2.9 percent.
Other index heavyweights fell, however. Fast Retailing was down 0.9 percent and SoftBank Group shed 1.4 percent.
Exporters got a small boost as the yen moved somewhat off a four-month high against the dollar reached overnight, after Japan's top currency official said Tokyo stands ready to take necessary steps if the market becomes too erratic.
Electronics manufacturer Panasonic gained 2.0 percent while construction machinery maker Komatsu advanced 2.4 percent and factory robot maker Fanuc Ltd tacked on 1.9 percent.
All but three of the Tokyo Stock Exchange's 33 subsectors were in positive territory, led by precision machinery and air transport. (Reporting by Daniel Leussink; Editing by richard Borsuk)