* Nikkei falls 0.7 pct after gaining over 5 pct on Monday
* Investors await the outcome of the U.S. Fed rate decision
* Morinaga & Co up after report on merger with Morinaga Milk
(Adds stocks, details)
By Aiko Hayashi
TOKYO, Dec 16 (Reuters) - The Nikkei average fell 0.7 percent
on Tuesday as investors locked in recent gains ahead of an
interest rate decision by the U.S. Federal Reserve, while Honda
Motor <7267.T> and other exporters were hurt by a firmer yen.
Nippon Steel Corp <5401.T> and other steel makers tumbled
after the Nikkei business daily said Toyota Motor Corp <7203.T>
plans to ask for a cut in steel prices of about 30 percent amid
slower demand. []
But confectionery maker Morinaga & Co <2201.T> climbed after
a report that it was in talks to merge with dairy product firm
Morinaga Milk Industry Co <2264.T>.
"Today's fall is simply due to profit-taking," said Fumiyuki
Nakanishi, manager at SMBC Friend Securities.
"Investors are closing out as they want to see the size of
the U.S. rate cut, because depending on the result, currencies
will move."
The benchmark Nikkei <> slipped 56.50 points to
8,608.16, after falling over 2 percent at one stage. It gained
5.2 percent the previous day.
The broader Topix <> declined 1.4 percent to 835.07.
The market is awaiting the outcome of a Fed policy meeting on
Tuesday, and the Fed is widely expected to cut rates by at least
a half percentage point to 0.50 percent.
Investors will also scrutinise the accompanying statement for
clues on what alternative policy steps the central bank will take
to dispel the recession.
Trade was light on the Tokyo exchange's first section, with
949 million shares changing hands, compared with last week's
morning average of 1 billion.
Declining shares outpaced advancing ones by nearly 3 to 1.
"What we saw is light volume that is particular to pre-event
trade. Investors are waiting to see the outcome of the Fed
meeting, as they lack any other significant trading factor," said
Takahiko Murai, general manager of equities at Nozomi Securities.
EXPORTERS DOWN
The dollar dropped 0.1 percent to 90.53 yen <JPY=> but stayed
above a 13-year low of 88.10 yen hit on Friday. 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 1,990 yen, while Sony
Corp <6758.T> lost 4.4 percent to 1,853 yen and Kyocera Corp
<6971.T> shed 2.2 percent to 6,250 yen.
Nippon Steel declined 4.1 percent to 284 yen, while JFE
Holdings Inc <5411.T> lost 4.7 percent to 2,430 yen and Sumitomo
Metal Industries Ltd <5405.T> was down 2.3 percent at 216 yen.
Confectionery maker Morinaga & Co jumped 6.8 percent to 204
yen, though Morinaga Milk, the nation's No.2 dairy product firm,
was flat at 347 yen after a report they would create a food
company with annual sales of about 760 billion yen ($8.4
billion). []
In separate statements, both Morinaga Milk and Morinaga & Co
said the report was incorrect.
Toyo Denki Seizo <6505.T> was awash with sell orders after
Nidec Corp <6594.OS>, the world's largest maker of motors for
hard disk drives, said it was scrapping its $325 million bid to
buy Toyo Denki, the maker of motors for railway cars.
[]
Orders for Toyo Denki were indicated at 258 yen, down by its
daily limit from from Monday's close of 338 yen. Nidec rose 0.6
percent to 3,520 yen.
(Reporting by Aiko Hayashi; Editing by Edwina Gibbs)
