* Sentiment buoyed by quickest rise in machinery orders in a year * Short-term macro funds selling reflationary stocks * Metal shares weak on China demand concern By Ayai Tomisawa TOKYO, March 13 (Reuters) - Japan's Nikkei share average edged up on Thursday morning after falling to a one-week low on the previous day as strong machinery data supported sentiment as far as metal shares, which remained pressured on persistent concern about Chinese demand.

Japan's core machinery orders rose in January at the fastest pace in almost a year, rebounding from a record decline in the previous month.

Knock-on sentiment helped the Nikkei gain 0.2 percent to 14,865.90. On Wednesday, the index fell its most in a month, by 2.6 percent, to its lowest closing level since March 4.

Investors are picking up shares battered by Wednesday's fall, but gains may be limited because of caution over Chinese economic growth as well as the impact of an April sales tax increase on Japan's economy, traders said.

There is also concern that momentum sparked by government reflationary policies is slowing, as shares of banks and real estate developers - the policies' primary beneficiaries - have risen less than the benchmark index, traders said.

"Short-term macro funds are selling reflationary stocks," said a senior portfolio manager at a foreign asset management firm. "Japan's fundamentals are not bad, but they (reflationary stocks) are the ones who contributed to the rally last year and they (investors) want to take profits as macro data have been disappointing." Recent U.S. data have also been disappointing, regardless of the impact of heavy snow, and concern about slowing Chinese demand has dragged down commodity prices, the portfolio manager said.

"Investors want to see if Japan's growth is intact before they start chasing the market higher." The real estate sector has dropped 18 percent since the beginning of the year, while the banking sector has fallen 13 percent. Over the same time, the Nikkei has shed 8.7 percent.

On Thursday, gainers included exporters and index heavyweight stocks. Sony Corp rose 1.0 percent, Honda Motor Co edged up 0.6 percent and SoftBank Corp added 1.0 percent.

Metal shares, hit heavily on Wednesday, were kept weak by China concerns. Sumitomo Metal Mining Co was flat while Dowa Holdings Co shed 0.6 percent.

Chinese industrial production and retail sales data for January and February will therefore draw investor attention around 0530 GMT.

The broader Topix index rose 0.2 percent to 1,209.42.

The JPX-Nikkei Index 400, a gauge comprising firms with high return on equity and strong corporate governance, advanced 0.2 percent to 10,942.17.