* Nikkei down 1.1 pct before BOJ rate decision
* Toyota slips after report warned about operating loss
* Daiichi Sankyo jumps after Europe backs key product
(Adds stocks, details)
By Aiko Hayashi
TOKYO, Dec 19 (Reuters) - The Nikkei average fell 1.1 percent
on Friday in cautious trade ahead of a decision on interest rates
by the Bank of Japan, with Toyota Motor <7203.T> retreating after
a newspaper report warned about an annual operating loss.
Oil-related shares such as Inpex Corp <1605.T> slid after
U.S. crude oil prices dropped sharply, but drugmaker Daiichi
Sankyo Co Ltd <4568.T> jumped after European regulators
recommended its new blood clot preventer prasugrel for approval.
Trade was choppy with the benchmark moving in and out of
positive territory throughout morning trade.
"The number of participants is limited, making the market
volatile, as investors want to see if the BOJ will cut interest
rates, and due to a lack of trading factors and the holiday
season," said Takahiko Murai, general manager of equities at
Nozomi Securities.
"The index will likely move in a narrow range unless
currencies start moving drastically or some big news emerges from
the United States."
The Nikkei <> shed 94.95 points to 8,572.28 and the
broader Topix <> dipped 0.4 percent to 835.53.
The Fed's dramatic rate cut has raised the pressure on a
reluctant BOJ to follow suit at its two-day policy review ending
on Friday. U.S. interest rates are now below Japanese rates for
the first time since February 1993. []
TOYOTA SLIPS, DAIICHI SANKYO JUMPS
Toyota shares shed 1 percent to 2,930 yen after the Nikkei
financial daily said the world's biggest automaker was likely to
report its first-ever operating loss in the year ending March 31
due to plunging sales and the strength of the yen. []
Other media said, however, that Toyota may manage to post an
operating profit on a consolidated basis although it would likely
book a loss on a parent-only basis.
"Toyota shares had already been sold off, but the market will
likely start pricing in the possibility that next year will be
even worse, preventing the stock price from going above 3,000 yen
in the short-term," said Murai at Nozomi Securities.
Rival Honda Motor Co Ltd <7267.T> shed 0.9 percent to 1,808
yen. Japan's second biggest automaker cut its annual operating
profit forecast by two-thirds this week due to a firmer yen and
dropping sales.
Oil and gas field developer Inpex tumbled 7.2 percent to
578,000 yen after hitting crude oil hit its lowest since June
2004 as slumping demand and swelling U.S. inventories offset
OPEC's record supply cut agreement. []
Showa Shell Sekiyu <5002.T> slid 2 percent to 836 yen and
Nippon Oil Corp <5001.T> lost 3.6 percent to 402 yen.
Trading houses also fell as they are major dealers in energy
and have stakes in oil and gas projects. Mitsubishi Corp
<8058.T>, Japan's largest trading house, dropped 2.7 percent to
1,173 yen.
Shares of Daiichi Sankyo <4568.T> jumped 5.1 percent to 2,010
yen after prasugrel developed by the Japan's No. 3 drugmaker and
Eli Lilly & Co, won a major endorsement from international
regulators on Thursday when the European Medicines Agency
recommended its approval. []
Banking shares rose, with Mitsubishi UFJ Financial Group
<8306.T>, Japan's biggest bank, up 2.2 percent at 554 yen and
No.2 Mizuho Financial Group <8411.T> adding 0.9 percent to
259,000 yen.
"Investors picked up stocks of banks or real estate firms
because they expect to see some financial measures from the Bank
of Japan," said Tsuyoshi Segawa, an equity strategist at Shinko
Securities.
Trade was light on the Tokyo exchange's first section, with
853 million shares changing hands, compared with last week's
morning average of 1 billion.
Declining stocks outpaced advancing ones by more than 2 to 1.
(Reporting by Aiko Hayashi; Editing by Edwina Gibbs)
