* Nikkei rises 1.1 pct after Fed rate cut
* Honda slides on expectations for profit warning
* Gains limited as automakers, strong yen weigh
(Adds stocks, details)
By Aiko Hayashi
TOKYO, Dec 17 (Reuters) - The Nikkei average rose 1.1 percent
on Wednesday, with banking stocks among the biggest gainers after
the U.S. Federal Reserve slashed borrowing costs to a record low,
prompting a rally on Wall Street.
But Honda Motor Co <7267.T> tumbled more than 4 percent on
expectations that it will likely issue its third profit warning
of the year on Wednesday, after abruptly moving up its year-end
news conference by two days. The news conference is now set for 3
p.m. (0600 GMT). []
"The Fed's stance that it's willing to take bold steps and do
everything in its power to deal with the situation helped boost
the market," said Kazuhiro Takahashi, general manager at Daiwa
Securities SMBC.
"But gains are somewhat tame because of a stronger yen and
because investors want to see how the U.S. market will fare from
now on. There's also a sense of fear about the auto industry as
their earnings prospects haven't improved at all due to a firm
yen."
The benchmark Nikkei <> added 91.14 points to 8,659.16,
after rising over 2 percent earlier. It fell 1.1 percent the
previous day.
The broader Topix <> gained 0.9 percent to 836.13.
In a unanimous vote, the Fed made a larger-than-expected cut
to the the benchmark federal funds rate by at least
three-quarters of a percentage point to a target range of zero to
0.25 percent from its current 1 percent. []
U.S. stocks rallied on the news with the Dow Jones industrial
average <> ending up 4.2 percent.
Analysts said the market will closely watch the outcome of
the Bank of Japan's policy setting meeting on Thursday and
Friday. The central bank is seen following the Fed's move.
"There's a possibility that the BOJ will cut rates, otherwise
the yen will strengthen even further," said Yukio Takahashi, a
market analyst at Shinko Securities.
"Hopes for measures like that will likely support the market,
though investors may stand on the sidelines before they see the
actual result."
BANKS GAIN
Banking stocks were among the strongest gainers in Tokyo with
No. 2 bank Mizuho Financial Group <8411.T> climbing 3.3
percent to 237,700 yen, while Sumitomo Mitsui Financial Group
<8316.T> jumped 5.3 percent to 357,000 yen.
Japan's biggest bank Mitsubishi UFJ Financial Group <8306.T>
rose 1.6 percent to 516 yen. Its arm Mitsubishi UFJ Trust &
Banking said on Tuesday that it would buy NikkoCiti Trust &
Banking, Citigroup's <C.N> Japanese trust bank. []
Drugmakers also gained as they are seen relatively resilient
in the face of the economic downturn. Astellas Pharma Inc
<4503.T> gained 4.5 percent to 3,470 yen.
But the U.S. dollar tumbled versus the euro and the yen as
the Fed's move further diminished the appeal of the greenback.
The dollar dipped 0.1 percent against the yen compared to
late U.S. trading on Tuesday to 88.84 yen <JPY=>, edging back
towards a 13-year low of 88.10 yen hit on trading platform EBS
late last week.
Investors fret over a stronger yen as it curbs Japanese
exporters' overseas profits when they are repatriated.
Shares of Honda dropped 4.6 percent to 1,883 yen, the top
drag on the Nikkei 225, and other automakers were also lower with
Toyota Motor Corp <7203.T> down 1.2 percent at 2,975 yen.
Shares in other leading exporters also slid
Kyocera Corp <6971.T> slid 2.2 percent to 6,250 yen and Sony
Corp <6758.T> fell 0.6 percent to 1,814 yen.
Among other notable stocks, Nippon Sheet Glass Co Ltd
<5202.T> lost 4.8 percent to 299 yen after UBS cut its rating to
"sell" from "neutral," saying the stronger yen and volume
declines in its automotive glass sales are likely to hurt the
company.
Trade was light on the Tokyo exchange's first section, with
914 million shares changing hands, compared with last week's
morning average of 1 billion.
Advancing shares slightly outpaced declining ones, 775 to
763.
(Reporting by Aiko Hayashi; Editing by Edwina Gibbs)
