diff --git a/j2k/src/org/jetbrains/jet/j2k/Converter.kt b/j2k/src/org/jetbrains/jet/j2k/Converter.kt
index acfffab7be2..e3ac5b8e6dd 100644
--- a/j2k/src/org/jetbrains/jet/j2k/Converter.kt
+++ b/j2k/src/org/jetbrains/jet/j2k/Converter.kt
@@ -461,13 +461,43 @@ public class Converter(val project: Project, val settings: ConverterSettings) {
         var nullability = variable.nullabilityFromAnnotations()
         if (nullability == Nullability.Default) {
             val initializer = variable.getInitializer()
-            if (initializer != null && variable.hasModifierProperty(PsiModifier.FINAL)) {
-                nullability = initializer.nullability()
+            if (initializer != null) {
+                val initializerNullability = initializer.nullability()
+                if (variable.hasModifierProperty(PsiModifier.FINAL)) { //TODO: replace check for final modifier with effective final
+                    nullability = initializerNullability
+                }
+                else if (initializerNullability == Nullability.Nullable) { // if variable is not final then non-nullability of initializer does not mean that variable is non-null
+                    nullability = Nullability.Nullable
+                }
             }
         }
         return convertType(variable.getType(), nullability)
     }
 
+    private fun PsiExpression.nullability(): Nullability {
+        return when (this) {
+            is PsiLiteralExpression -> if (getValue() != null) Nullability.NotNull else Nullability.Nullable
+
+            is PsiNewExpression -> Nullability.NotNull
+
+            is PsiConditionalExpression -> {
+                val nullability1 = getThenExpression()?.nullability()
+                if (nullability1 == Nullability.Nullable) return Nullability.Nullable
+                val nullability2 = getElseExpression()?.nullability()
+                if (nullability2 == Nullability.Nullable) return Nullability.Nullable
+                if (nullability1 == Nullability.NotNull && nullability2 == Nullability.NotNull) return Nullability.NotNull
+                Nullability.Default
+            }
+
+            is PsiParenthesizedExpression -> getExpression()?.nullability() ?: Nullability.Default
+
+        //TODO: some other cases
+
+            else -> Nullability.Default
+        }
+    }
+
+
     private fun convertToNotNullableTypes(types: Array<out PsiType?>): List<Type>
             = types.map { convertType(it, Nullability.NotNull) }
 
diff --git a/j2k/src/org/jetbrains/jet/j2k/Utils.kt b/j2k/src/org/jetbrains/jet/j2k/Utils.kt
index e83722a5fe2..f6980362c8e 100644
--- a/j2k/src/org/jetbrains/jet/j2k/Utils.kt
+++ b/j2k/src/org/jetbrains/jet/j2k/Utils.kt
@@ -62,13 +62,6 @@ fun PsiModifierListOwner.nullabilityFromAnnotations(): Nullability {
         Nullability.Default
 }
 
-fun PsiElement?.nullability(): Nullability = when(this) {
-    is PsiLiteralExpression -> if (getValue() != null) Nullability.NotNull else Nullability.Nullable
-    is PsiNewExpression -> Nullability.NotNull
-    //TODO: other cases
-    else -> Nullability.Default
-}
-
 fun getDefaultInitializer(field: Field): String {
     if (field.`type`.isNullable) {
         return "null"
diff --git a/j2k/tests/test/org/jetbrains/jet/j2k/test/JavaToKotlinConverterTestGenerated.java b/j2k/tests/test/org/jetbrains/jet/j2k/test/JavaToKotlinConverterTestGenerated.java
index c8097b7fd64..21c4d0546c1 100644
--- a/j2k/tests/test/org/jetbrains/jet/j2k/test/JavaToKotlinConverterTestGenerated.java
+++ b/j2k/tests/test/org/jetbrains/jet/j2k/test/JavaToKotlinConverterTestGenerated.java
@@ -16,19 +16,22 @@
 
 package org.jetbrains.jet.j2k.test;
 
+import junit.framework.Assert;
 import junit.framework.Test;
 import junit.framework.TestSuite;
+
+import java.io.File;
+import java.util.regex.Pattern;
 import org.jetbrains.jet.JetTestUtils;
 import org.jetbrains.jet.test.InnerTestClasses;
 import org.jetbrains.jet.test.TestMetadata;
 
-import java.io.File;
-import java.util.regex.Pattern;
+import org.jetbrains.jet.j2k.test.AbstractJavaToKotlinConverterTest;
 
 /** This class is generated by {@link org.jetbrains.jet.generators.tests.TestsPackage}. DO NOT MODIFY MANUALLY */
 @SuppressWarnings("all")
 @TestMetadata("j2k/tests/testData/ast")
-@InnerTestClasses({JavaToKotlinConverterTestGenerated.Annotations.class, JavaToKotlinConverterTestGenerated.AnonymousBlock.class, JavaToKotlinConverterTestGenerated.ArrayAccessExpression.class, JavaToKotlinConverterTestGenerated.ArrayInitializerExpression.class, JavaToKotlinConverterTestGenerated.ArrayType.class, JavaToKotlinConverterTestGenerated.AssertStatement.class, JavaToKotlinConverterTestGenerated.AssignmentExpression.class, JavaToKotlinConverterTestGenerated.BinaryExpression.class, JavaToKotlinConverterTestGenerated.BoxedType.class, JavaToKotlinConverterTestGenerated.BreakStatement.class, JavaToKotlinConverterTestGenerated.CallChainExpression.class, JavaToKotlinConverterTestGenerated.Class.class, JavaToKotlinConverterTestGenerated.ClassExpression.class, JavaToKotlinConverterTestGenerated.ConditionalExpression.class, JavaToKotlinConverterTestGenerated.Constructors.class, JavaToKotlinConverterTestGenerated.ContinueStatement.class, JavaToKotlinConverterTestGenerated.DeclarationStatement.class, JavaToKotlinConverterTestGenerated.DoWhileStatement.class, JavaToKotlinConverterTestGenerated.Enum.class, JavaToKotlinConverterTestGenerated.Field.class, JavaToKotlinConverterTestGenerated.For.class, JavaToKotlinConverterTestGenerated.ForeachStatement.class, JavaToKotlinConverterTestGenerated.Formatting.class, JavaToKotlinConverterTestGenerated.Function.class, JavaToKotlinConverterTestGenerated.Identifier.class, JavaToKotlinConverterTestGenerated.IfStatement.class, JavaToKotlinConverterTestGenerated.ImportStatement.class, JavaToKotlinConverterTestGenerated.InProjectionType.class, JavaToKotlinConverterTestGenerated.Inheritance.class, JavaToKotlinConverterTestGenerated.IsOperator.class, JavaToKotlinConverterTestGenerated.Issues.class, JavaToKotlinConverterTestGenerated.KotlinExclusion.class, JavaToKotlinConverterTestGenerated.LabelStatement.class, JavaToKotlinConverterTestGenerated.List.class, JavaToKotlinConverterTestGenerated.LiteralExpression.class, JavaToKotlinConverterTestGenerated.LocalVariable.class, JavaToKotlinConverterTestGenerated.MethodCallExpression.class, JavaToKotlinConverterTestGenerated.Misc.class, JavaToKotlinConverterTestGenerated.NewClassExpression.class, JavaToKotlinConverterTestGenerated.ObjectLiteral.class, JavaToKotlinConverterTestGenerated.OutProjectionType.class, JavaToKotlinConverterTestGenerated.PackageStatement.class, JavaToKotlinConverterTestGenerated.ParenthesizedExpression.class, JavaToKotlinConverterTestGenerated.PolyadicExpression.class, JavaToKotlinConverterTestGenerated.PostfixOperator.class, JavaToKotlinConverterTestGenerated.PrefixOperator.class, JavaToKotlinConverterTestGenerated.RawGenerics.class, JavaToKotlinConverterTestGenerated.ReturnStatement.class, JavaToKotlinConverterTestGenerated.Settings.class, JavaToKotlinConverterTestGenerated.StarProjectionType.class, JavaToKotlinConverterTestGenerated.SuperExpression.class, JavaToKotlinConverterTestGenerated.Switch.class, JavaToKotlinConverterTestGenerated.SynchronizedStatement.class, JavaToKotlinConverterTestGenerated.ThisExpression.class, JavaToKotlinConverterTestGenerated.ThrowStatement.class, JavaToKotlinConverterTestGenerated.Trait.class, JavaToKotlinConverterTestGenerated.TryStatement.class, JavaToKotlinConverterTestGenerated.TypeCastExpression.class, JavaToKotlinConverterTestGenerated.TypeParameters.class, JavaToKotlinConverterTestGenerated.VarArg.class, JavaToKotlinConverterTestGenerated.WhileStatement.class})
+@InnerTestClasses({JavaToKotlinConverterTestGenerated.Annotations.class, JavaToKotlinConverterTestGenerated.AnonymousBlock.class, JavaToKotlinConverterTestGenerated.ArrayAccessExpression.class, JavaToKotlinConverterTestGenerated.ArrayInitializerExpression.class, JavaToKotlinConverterTestGenerated.ArrayType.class, JavaToKotlinConverterTestGenerated.AssertStatement.class, JavaToKotlinConverterTestGenerated.AssignmentExpression.class, JavaToKotlinConverterTestGenerated.BinaryExpression.class, JavaToKotlinConverterTestGenerated.BoxedType.class, JavaToKotlinConverterTestGenerated.BreakStatement.class, JavaToKotlinConverterTestGenerated.CallChainExpression.class, JavaToKotlinConverterTestGenerated.Class.class, JavaToKotlinConverterTestGenerated.ClassExpression.class, JavaToKotlinConverterTestGenerated.ConditionalExpression.class, JavaToKotlinConverterTestGenerated.Constructors.class, JavaToKotlinConverterTestGenerated.ContinueStatement.class, JavaToKotlinConverterTestGenerated.DeclarationStatement.class, JavaToKotlinConverterTestGenerated.DoWhileStatement.class, JavaToKotlinConverterTestGenerated.Enum.class, JavaToKotlinConverterTestGenerated.Field.class, JavaToKotlinConverterTestGenerated.For.class, JavaToKotlinConverterTestGenerated.ForeachStatement.class, JavaToKotlinConverterTestGenerated.Formatting.class, JavaToKotlinConverterTestGenerated.Function.class, JavaToKotlinConverterTestGenerated.Identifier.class, JavaToKotlinConverterTestGenerated.IfStatement.class, JavaToKotlinConverterTestGenerated.ImportStatement.class, JavaToKotlinConverterTestGenerated.InProjectionType.class, JavaToKotlinConverterTestGenerated.Inheritance.class, JavaToKotlinConverterTestGenerated.IsOperator.class, JavaToKotlinConverterTestGenerated.Issues.class, JavaToKotlinConverterTestGenerated.KotlinExclusion.class, JavaToKotlinConverterTestGenerated.LabelStatement.class, JavaToKotlinConverterTestGenerated.List.class, JavaToKotlinConverterTestGenerated.LiteralExpression.class, JavaToKotlinConverterTestGenerated.LocalVariable.class, JavaToKotlinConverterTestGenerated.MethodCallExpression.class, JavaToKotlinConverterTestGenerated.Misc.class, JavaToKotlinConverterTestGenerated.NewClassExpression.class, JavaToKotlinConverterTestGenerated.Nullability.class, JavaToKotlinConverterTestGenerated.ObjectLiteral.class, JavaToKotlinConverterTestGenerated.OutProjectionType.class, JavaToKotlinConverterTestGenerated.PackageStatement.class, JavaToKotlinConverterTestGenerated.ParenthesizedExpression.class, JavaToKotlinConverterTestGenerated.PolyadicExpression.class, JavaToKotlinConverterTestGenerated.PostfixOperator.class, JavaToKotlinConverterTestGenerated.PrefixOperator.class, JavaToKotlinConverterTestGenerated.RawGenerics.class, JavaToKotlinConverterTestGenerated.ReturnStatement.class, JavaToKotlinConverterTestGenerated.Settings.class, JavaToKotlinConverterTestGenerated.StarProjectionType.class, JavaToKotlinConverterTestGenerated.SuperExpression.class, JavaToKotlinConverterTestGenerated.Switch.class, JavaToKotlinConverterTestGenerated.SynchronizedStatement.class, JavaToKotlinConverterTestGenerated.ThisExpression.class, JavaToKotlinConverterTestGenerated.ThrowStatement.class, JavaToKotlinConverterTestGenerated.Trait.class, JavaToKotlinConverterTestGenerated.TryStatement.class, JavaToKotlinConverterTestGenerated.TypeCastExpression.class, JavaToKotlinConverterTestGenerated.TypeParameters.class, JavaToKotlinConverterTestGenerated.VarArg.class, JavaToKotlinConverterTestGenerated.WhileStatement.class})
 public class JavaToKotlinConverterTestGenerated extends AbstractJavaToKotlinConverterTest {
     public void testAllFilesPresentInAst() throws Exception {
         JetTestUtils.assertAllTestsPresentByMetadata(this.getClass(), "org.jetbrains.jet.generators.tests.TestsPackage", new File("j2k/tests/testData/ast"), Pattern.compile("^(.+)\\.java$"), true);
@@ -1771,6 +1774,29 @@ public class JavaToKotlinConverterTestGenerated extends AbstractJavaToKotlinConv
         
     }
     
+    @TestMetadata("j2k/tests/testData/ast/nullability")
+    public static class Nullability extends AbstractJavaToKotlinConverterTest {
+        public void testAllFilesPresentInNullability() throws Exception {
+            JetTestUtils.assertAllTestsPresentByMetadata(this.getClass(), "org.jetbrains.jet.generators.tests.TestsPackage", new File("j2k/tests/testData/ast/nullability"), Pattern.compile("^(.+)\\.java$"), true);
+        }
+        
+        @TestMetadata("FieldInitializedWithNull.java")
+        public void testFieldInitializedWithNull() throws Exception {
+            doTest("j2k/tests/testData/ast/nullability/FieldInitializedWithNull.java");
+        }
+        
+        @TestMetadata("InitializedWithNull.java")
+        public void testInitializedWithNull() throws Exception {
+            doTest("j2k/tests/testData/ast/nullability/InitializedWithNull.java");
+        }
+        
+        @TestMetadata("InitializedWithTernaryNull.java")
+        public void testInitializedWithTernaryNull() throws Exception {
+            doTest("j2k/tests/testData/ast/nullability/InitializedWithTernaryNull.java");
+        }
+        
+    }
+    
     @TestMetadata("j2k/tests/testData/ast/objectLiteral")
     public static class ObjectLiteral extends AbstractJavaToKotlinConverterTest {
         public void testAllFilesPresentInObjectLiteral() throws Exception {
@@ -2404,6 +2430,7 @@ public class JavaToKotlinConverterTestGenerated extends AbstractJavaToKotlinConv
         suite.addTestSuite(MethodCallExpression.class);
         suite.addTestSuite(Misc.class);
         suite.addTestSuite(NewClassExpression.class);
+        suite.addTestSuite(Nullability.class);
         suite.addTestSuite(ObjectLiteral.class);
         suite.addTestSuite(OutProjectionType.class);
         suite.addTestSuite(PackageStatement.class);
diff --git a/j2k/tests/testData/ast/nullability/FieldInitializedWithNull.java b/j2k/tests/testData/ast/nullability/FieldInitializedWithNull.java
new file mode 100644
index 00000000000..c44955232d7
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/FieldInitializedWithNull.java
@@ -0,0 +1,8 @@
+//file
+class C {
+    private String s = null;
+
+    void foo() {
+        s = "x"
+    }
+}
diff --git a/j2k/tests/testData/ast/nullability/FieldInitializedWithNull.kt b/j2k/tests/testData/ast/nullability/FieldInitializedWithNull.kt
new file mode 100644
index 00000000000..f0ace432167
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/FieldInitializedWithNull.kt
@@ -0,0 +1,7 @@
+class C() {
+    private var s: String? = null
+
+    fun foo() {
+        s = "x"
+    }
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/InitializedWithNull.java b/j2k/tests/testData/ast/nullability/InitializedWithNull.java
new file mode 100644
index 00000000000..4ae405974ed
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/InitializedWithNull.java
@@ -0,0 +1,8 @@
+//method
+// !specifyLocalVariableTypeByDefault: true
+void foo(boolean b) {
+  String s = null;
+  if (b) {
+      s = "abc"
+  }
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/InitializedWithNull.kt b/j2k/tests/testData/ast/nullability/InitializedWithNull.kt
new file mode 100644
index 00000000000..3cf757e8d10
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/InitializedWithNull.kt
@@ -0,0 +1,7 @@
+// !specifyLocalVariableTypeByDefault: true
+fun foo(b: Boolean) {
+    val s: String? = null
+    if (b) {
+        s = "abc"
+    }
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/InitializedWithTernaryNull.java b/j2k/tests/testData/ast/nullability/InitializedWithTernaryNull.java
new file mode 100644
index 00000000000..345ab62cd15
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/InitializedWithTernaryNull.java
@@ -0,0 +1,5 @@
+//method
+// !specifyLocalVariableTypeByDefault: true
+void foo(boolean b) {
+  String s = (b ? "abc" : null);
+}
\ No newline at end of file
diff --git a/j2k/tests/testData/ast/nullability/InitializedWithTernaryNull.kt b/j2k/tests/testData/ast/nullability/InitializedWithTernaryNull.kt
new file mode 100644
index 00000000000..d9b779d3f53
--- /dev/null
+++ b/j2k/tests/testData/ast/nullability/InitializedWithTernaryNull.kt
@@ -0,0 +1,7 @@
+// !specifyLocalVariableTypeByDefault: true
+fun foo(b: Boolean) {
+    val s: String? = ((if (b)
+        "abc"
+    else
+        null))
+}
\ No newline at end of file