TOKYO (AP) _ Share prices rebounded today on the Tokyo Stock Exchange, while the dollar closed lower against the yen.

The 225-issue Nikkei Stock Average closed up 209.67 points, or 0.96 percent, at 21,712.57 points. The widely used index of leading issues had been up over 480 points late in the morning.

On Wednesday, the average plummeted nearly 800 points on continued selling pressure from arbitrage trading before bouncing back to finish the day down 450.16 points, or 2.05 percent.

Volume on the first section was estimated at 220 million shares, down from 306.7 million shares Wednesday.

Advancing issues outnumbered declining issues 786 to 186, while 140 issues remained unchanged.

The Tokyo Stock Price Index of all issues listed on the first section, which lost 19.13 points Wednesday, was up 16.34 points, or 0.98 percent, to close at 1,683.04.

Today's rebound, which broke a five-day slump, was supported by bargain- hunting carried over from the recovery late Wednesday.

''After six weeks of consecutive declines, things are looking pretty cheap,'' said Liam Newberg, a dealer with Merrill Lynch. He said interest- sensitive issues enjoyed support from an unconfirmed rumor that short-term rates would be eased.

But other dealers warned that the index was gaining on very thin volume and continued to be influenced by technical trading.

''The market feels very fragile,'' said Oliver Eberstadt of Dresdner Securities. ''It's very dried out and it doesn't take much to push it up that much.''

Stocks tottered this week as traders unwound arbitrage positions before the Friday deadline of December special quotations. In addition, worries about Japan's economy were exacerbated by the release Tuesday of a worse-than- expected central bank report on business sentiment.

''There's not too much reason to be hugely enthused,'' said Paul Migliorato, a dealer with Jardine Fleming. A series of very pessimistic earnings forecasts by major companies has scared away many investors, he said.

The dollar closed at 128.90 yen, down 0.48 yen from Wednesday's close. After opening at 129.10 yen, it traded as low as 128.90 yen and as high as 129.20 yen.

Spot trading totaled $5.82 billion against $9.64 billion Wednesday.

The dollar opened lower on weakness carried over from New York, where it fell against European currencies after a brief rally as dealers corrected oversold positions.

But dollar trading remained quiet in Tokyo as dealers awaited the release later Thursday of the U.S. producer price index and retail sales figures for November.

The yen, which firmed somewhat on the mild recovery on the Tokyo stock market, also helped keep the dollar down.

The benchmark No. 129 10-year Japanese government bonds closed at 104.41 points, up from Wednesday's 104.21-point finish. Their yield fell to 5.615 percent from 5.650 percent.