Nikkei up 2.6 pct on domestic demand stocks, Aeon jumps

                                
 * Nikkei gains 2.6 pct after Wall Street's rise
                                
 * Fast Retailing, domestic demand stocks climb
                                
 * Aeon jumps on news Mitsubishi to buy stake
 (Adds stocks, details)
                                
 By Aiko Hayashi
                                
 TOKYO, Dec 8 (Reuters) - The Nikkei average gained 2.6
percent on Monday as shares reliant on domestic demand such as
drugmakers gained amid the deteriorating global economy, while
Fast Retailing <9983.T> climbed on robust sales.
                                
 Retailer Aeon Co <8267.T> shot up nearly 7 percent after two
company sources said on Saturday that top trading firm Mitsubishi
Corp <8058.T> plans to buy a roughly 5 percent stake in the
retailer for more than $324 million, and the two will tie up on
overseas procurement amid the economic downturn. [ID:nT342260]
                                
 But Toyota Motor Corp <7203.T> slipped after the Nikkan Kogyo
newspaper reported on Monday that the automaker is considering
cutting capital investment in the business year starting next
April 1 by 30-40 percent from the current year in response to a
sharp downturn in auto sales. [ID:nT34828]
                                
 "Stocks tracked gains on Wall Street, which has grown more
resilient to bad news including Friday's jobs data, with
investors buying on dips and expecting economic measures by the
new president," said Katsuhiko Kodama, a senior strategist at
Toyo Securities.
                                
 U.S. President-elect Barack Obama, who takes office on Jan.
20, began outlining his economic recovery plan on Saturday,
saying he aims to create at least 2.5 million new jobs by 2011
and launch the largest U.S. infrastructure investment since the
1950s. [ID:nN07465877]
                                
 "But people can't keep their eyes off currency moves. I
expect the yen will strengthen towards the year-end and the
beginning of next year, and that will cap further gains in
Japanese stocks," Kodama said.
                                
 The benchmark Nikkei <.N225> added 203.20 points to end the
morning at 8,120.71. It ended down 0.1 percent on Friday, and
fell 7 percent on the week.
                                
 The broader Topix <.TOPX> gained 1.4 percent to 797.36.
                                
 The dollar was steady from late U.S. trading on Friday at
92.90 yen <JPY=>. Investors fret over a stronger yen as it eats
into exporters' overseas profits when they are repatriated.
                                
 U.S stocks jumped on Friday as investors bet that a steep
drop in oil prices will boost consumer spending, lifting retail
stocks and offsetting government data showing half a million jobs
were lost in November, the weakest performance in 34 years. [.N]
[ID:nN05444819]
                                
 Investors also continued to watch the fate of the ailing U.S.
auto industry.
                                
 Negotiators tried to forge an agreement in principle to
provide the "Big Three" American automakers -- GM <GM.N>, Ford
<F.N> and Chrysler <CBS.UL> -- with at least $15 billion in
short-term loans. [ID:nN07462460]
                                
 The U.S. Senate is due back in session on Monday and
negotiators hope to have a package ready that can be quickly
approved and sent to President George W. Bush as one of the last
measures he signs into law before Obama succeeds him as
president.
                                
 AEON JUMPS
                                
 "Exporters are hard to buy because they are likely to further
cut their forecasts," said Yoku Ihara, manager at Retela Crea
Securities.
                                
 "Given banks' uncertain earnings prospects due to potential
bad loans, and with exporters under pressure, the overall market
finds itself in a tough position."
                                
 Among the drugmakers, Eisai Co Ltd <4523.T> jumped 6.3
percent to 3,360 yen and Astellas Pharma Inc <4503.T> added 1.8
percent to 3,930 yen, while Kao Corp <4452.T>, Japan's biggest
household products maker, gained 3.2 percent to 2,890 yen.
                                
 Aeon shares jumped 6.6 percent to 883 yen, while Mitsubishi
climbed 3 percent to 1,037 yen.
                                
 Fast Retailing <9983.T> extended gains made last week on
strong sales at its Uniqlo casual clothing store chain and a
brokerage upgrade, rising 6.2 percent to 12,570 to become the top
positive contributor to the Nikkei 225.
                                
 Toyota fell 1.3 percent to 2,615 yen, though some other
beaten-down exporters gained ground, with Sony Corp <6758.T> up
3.1 percent at 1,784 yen.
                                
 Trade was thin on the Tokyo exchange's first section, with
698 million shares changing hands, compared with last week's
morning average of 791 million.
Advancing shares outpaced declining ones by more than 2 to 1.
 (Reporting by Aiko Hayashi)