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Nikkei treads water as heavyweight gains offset Spain worries

Tuesday, 2 Oct 2012 | 11:02 PM ET

* Fast Retailing strong, sales to reach 1 trln-Nikkei

* Toyota gains after massive sales leap in U.S.

* Investors leery of big moves ahead of week's events

By Sophie Knight

TOKYO, Oct 3 (Reuters) - Japan's Nikkei share average was little changed on Wednesday morning as gains for index heavyweights such as Fast Retailing Co

were offset by broader concerns over a bailout for Spain and volume ahead of the week's macro events.

Fast Retailing rose 4.2 percent, giving the benchmark 30 positive points, after the Nikkei daily said the operator of popular clothing firm Uniqlo should see sales top 1 trillion yen ($12.8 billion) in the year ending August 2013.

Toyota Motor Co

also lent support, rising 1.2 percent in heavy trade after its U.S. passenger car sales jumped 42 percent in September from the same month last year, as U.S. monthly car sales struck their highest level since March 2008.

Nissan Motor Co

, however, saw a year-on-year decline of 1.1 percent, leaving its share price down 0.8 percent.

The Nikkei added just 9.1 points to 8,795.10 by midday on a lack of larger incentives and as investors brooded over when, or indeed whether, Spain will request a bailout after Prime Minister Mariano Rajoy said he would not ask for one soon.

"We have problems with Greece and with Spain, but without any really positive news out it's very difficult to judge where a comfortable range for the Nikkei should be," said Yuuki Sakurai, CEO of Fukoku Capital Management.

Investors are also reluctant to move ahead of a series of big events over the next few days with the European Central Bank and the Bank of Japan both due to start policy meetings on Thursday and U.S. payroll data due on Friday.

"I think the BOJ is likely to loosen monetary policy because they said they would act if the economy worsened, which their last Tankan survey bore out," said Kyoya Okazawa, head of global equities at BNP Paribas.

Concern about dwindling global growth simmered as Australian exports dropped 3 percent in August from the previous year as a slowdown in China, the country's biggest export market, crimped shipments of raw materials such as metals and coal.

Investors fear Japanese firms' revenues in China will fall sharply in September after Japanese factories and shops were closed following protests triggered by a territorial dispute, which remains unresolved.

"The greatest concern for the market right now is how long this dispute could drag on," Okazawa of BNP Paribas said.

Despite that, the president of Murata Manufacturing Co Ltd

said the precision machinery firm and Apple Inc

supplier could escape those headwinds thanks to strong demand from smartphone makers, and its Chinese factories were at full capacity.

The stock rose 0.7 percent. LOW FLOW

Analysts said a lack of major news was responsible for low volumes, with institutional investors mostly remaining on the sidelines through Wednesday morning.

The broader Topix index

seesawed through the morning in thin trade, with volume at just 40.9 percent of its full-day average over the past 90 days. The index dropped 0.2 percent to 730.11.

"A lack of incentives means even a little bit of news about individual stocks will shift them disproportionately. Institutional flow is extremely quiet today," said Okazawa.

A case in point, NEC Corp rose 2.4 percent and Orix Corp

added 0.5 percent after the Nikkei business daily said the firms would begin renting large-capacity storage batteries to households to encourage domestic solar power use.

Elsewhere, Daiichi Sankyo Co Ltd

sagged 4.5 percent to hit a record low after U.S. biotechnology company ArQule Inc

said it will discontinue a late-stage trial of the two companies' lung cancer drug after analysis showed the drug would not improve overall survival rates.

($1 = 78.0400 Japanese yen)

(Additional reporting by Dominic Lau; Editing by Matt Driskill)

((sophie.knight@thomsonreuters.com)(+81 3 6441 1833)(Reuters Messaging:)(sophie.knight.thomsonreuters.com@reuters.net))

Keywords: MARKETS JAPAN STOCKS/