* Nikkei down 0.8 pct after 6-week closing high on Friday
* Mitsui Sumitomo Insurance, rivals jump on merger talks
* Tokyo bourse ends year with half-day of trade on Tuesday
(Adds stocks, details)
By Aiko Hayashi
TOKYO, Dec 29 (Reuters) - Japan's Nikkei average fell 0.8
percent on Monday, the last full trading day of the year, but
Mitsui Sumitomo Insurance Group Holdings <8725.T> jumped on news
it was in talks to merge with other non-life insurers.
Market heavyweights Toyota Motor Corp <7203.T> fell 1 percent
to 2,870 yen and Canon Inc <7751.T> shed 1.8 percent to 2,670
yen, giving back some of their recent gains and weighing on the
market.
Mitsui Sumitomo Insurance, Aioi Insurance Co <8761.T> and
Nissay Dowa General Insurance Co <8759.T> are in talks to merge,
a company source said, a move that would create Japan's largest
non-life insurer. []
"The only trading factor is insurers. Investors liked the
merger news as it sparked hopes of greater profitability and less
competition in the sector," said Yoshinori Nagano, a chief
strategist at Daiwa Asset Management.
But he added that there were few people trading in the market
except for those adjusting positions before the year-end.
The Tokyo bourse will end the year with a half day of trading
on Tuesday and reopen on Jan. 5.
The benchmark Nikkei <> shed 69.58 points to 8,669.94
after rising 1.6 percent on Friday to hit its highest close in
six weeks.
The broader Topix <> dipped 0.3 percent to 844.31.
"The market has factored in the notion that the economy will
worsen in the immediate future, but it is finding it hard to make
the next move because it is still unclear when the market will
hit the bottom," said Kenichi Hirano, an operating officer at
Tachibana Securities.
"Recent consensus is that the economy won't recover until the
year after next, and that is later than initially thought."
Trade was light on the Tokyo exchange's first section, with
576 million shares changing hands, compared with last week's
daily average of 597 million.
Declining stocks and advancing ones were almost even at 742
to 735.
INSURERS SHINE ON MERGER TALKS
Mitsui Sumitomo Insurance shot up 6.8 percent to 2,845 yen,
while Aioi Insurance soared 17 percent to 475 yen and Nissay Dowa
surged 13.5 percent to 571 yen.
The three companies said in separate statements that they had
nothing to announce at this time, while Japanese media, including
the Nikkei business daily and public broadcaster NHK, said the
three were in talks to merge as early as next autumn.
NEC Corp <6701.T> jumped 6.3 percent to 269 yen after the
Nikkei business daily said it and Nissan Motor Co <7201.T> plan
to invest 100 billion yen ($1.1 billion) or more to manufacture
large-capacity lithium ion batteries.
Shares of Nissan added 0.6 percent to 315 yen.
Yamaha Motor Co <7272.T> slid 2.3 percent to 906 yen after
the company said on Friday it would likely book an extraordinary
loss of about 17 billion yen for calendar 2008 due to a slide in
the value of its securities holdings.
The motorcycle maker said the special loss was not factored
into its annual earnings forecast. []
(Reporting by Aiko Hayashi; Editing by Edwina Gibbs)
