Nikkei up on techs after 26-year low, banks weigh

                                
 *Nikkei touches 26-year intraday low of 7,486.44
                                
 *Briefly rises over 3 pct on tech and defensive shares
                                
 *Market eyes yen as it edges down against dollar
                                
 *Large banks weigh on fears of fundraising to offset losses
                                
 (Adds details, stocks)
                                
 By Elaine Lies
                                
 TOKYO, Oct 27 (Reuters) - Japan's Nikkei average climbed 0.4
percent on Monday after earlier hitting a 26-year low, buoyed by
tech shares such as Sony Corp <6758.T> and a slightly weaker yen
as investors pinned their hopes on government policy steps.
                                
 But shares of Mitsubishi UFJ Financial Group <8306.T> and
other large banks weighed on the market amid general gloom about
the global economy, hit by concern they may need to raise
billions of dollars each to offset hefty losses on their stock
portfolios.
                                
 The benchmark Nikkei <.N225> fell as far as 7,486.44, its
lowest since 1982 -- when Ronald Reagan was U.S. president and
Sony Corp <6758.T> introduced the first CD player.
                                
 It ended the morning up 30.42 points at 7,679.50, while the
broader Topix <.TOPX> was down 1.5 percent at 794.45.
                                
 Market players said they were waiting for the announcement of
government steps to brake the relentless fall in Japanese share
prices, which has seen the Nikkei lose 32 percent so far this
month and 50 percent this year, although expectations were mixed.
                                
 "We need something that surprises the market in a good way,
perhaps something like the government intervening to sell yen in
the currency market," said Masayoshi Okamoto, head of dealing at
Jujiya Securities.
                                
 "If we don't have something like this, today's low -- the
26-year low -- won't be significant at all."
                                
 The yen relinquished some early gains against the dollar
after climbing back near a 13-year peak against the U.S.
currency, and Japanese Finance Minister Shoichi Nakagawa said he
was watching the currency market with great interest, suggesting
that Japan may be getting closer to considering intervention.
                                
 The Nikkei business daily had reported on Sunday that the
government would announce additional steps to stabilise financial
markets before the start of trade on Monday. [ID:nT83427]
                                
 Tokyo is considering banning so-called naked short-selling
and introducing a rule requiring stock investors to disclose
massive short-selling transactions, the Nikkei said.
                                
 "We need something more than what was in the Nikkei. That
might help stop stocks from sliding, but it certainly wouldn't
help them recover much," Okamoto added.
                                
 Nakagawa is set to meet with Prime Minister Taro Aso and
ruling party policymakers from 11:30 a.m. (0230 GMT) to discuss
the economic and financial situation surrounding Japan.
                                
 Many market players were wary.
                                
 "The announcement of such economic steps may have effects but
whether those will be strong enough to turn the current market
trend upward still needs a careful assessment," said Fumiyuki
Nakanishi, chief strategist at SMBC Friend Securities.
                                
 BANKS BATTERED
                                
 Banks dragged on the Nikkei, with Mitsubishi UFJ down more
than 13 percent at one point after people familiar with the
matter said the bank, Japan's top lender, is considering raising
up to 1 trillion yen ($10.8 billion) to shore up its capital.
[ID:nT73810]
                                
 Mizuho Financial Group <8411.T>, Japan's second-largest bank,
and third-ranked Sumitomo Mitsui Financial Group <8316.T> are
both looking to raise as much as 500 billion yen ($5.4 billion),
newspapers reported on Monday.
                                
 Mitsubishi UFJ was down 11.1 percent at 607 yen, while Mizuho
lost 8 percent to 248,300 yen and Sumitomo Mitsui shed 10.6
percent to 389,000 yen.
                                
 This downward pressure was countered, though, by gains in
tech shares, especially Hitachi Ltd <6501.T> and Sony Corp
<6758.T>.
                                
 Hitachi rose 3.9 percent to 430 yen after the electronics
conglomerate lifted its half-year profit forecast by 58 percent
on a stronger-than-expected information technology business,
bucking falls in electronics makers that have been hit by a
weakening global economy and a firmer yen. [ID:nT65463]
                                
 Sony was up 2.9 percent at 2,030 yen after Chief Executive
Howard Stringer said on Monday the electronics maker intends to
keep its performance targets for the year to March 2011, which
includes hitting a return on equity of 10 percent.
                                
 TDK Corp <6762.T> rose 4.5 percent to 3,020 yen and
industrial robot maker Fanuc Ltd <6954.T> rose 7 percent to 5,210
yen.
                                
 Trade picked up on the Tokyo exchange's first section, with
1.24 billion shares changing hands compared with last week's
morning average of 986 million.
                                
 Decliners outnumbered advancers by nearly 2 to 1.
 (Additional reporting by Kaori Kaneko; Editing by Chris
Gallagher)