Nikkei up 0.6 pct on defensive plays, but yen weighs

                                
 * Nikkei edges up 0.6 pct, eyes on yen strength
                                
 * Nippon Oil, Nippon Mining Holdings up on merger talk
                                
 * Drugmakers strong, Fast Retailing climbs on upgrade
 (Adds stocks, details)
                                
 By Elaine Lies
TOKYO, Dec 4 (Reuters) - Japan's Nikkei average edged up 0.6
percent on Thursday as buying of drugmakers and other defensive
shares narrowly outweighed selling of exporters such as Honda
Motor Co <7267.T> on growing concern about the global economy.
                                
 Japan's top refiner Nippon Oil Corp <5001.T> and sixth-ranked
Nippon Mining Holdings Inc <5016.T> both surged nearly 14 percent
after they said they were considering a merger to better compete
amid sliding prices and slower demand. [ID:nT282839]
                                
 But in other merger news, shares of Sanyo Electric <6764.T>
tumbled 13 percent to 147 yen after the Nikkei business daily
said Panasonic Corp <6752.T> had raised its buyout offer for
Sanyo by 10 yen to 130 yen per share in the hope of closing a
deal this week. [ID:nN03348603]
                                
 Shares of Panasonic fell 1.3 percent to 1,077 yen.
                                
 "Basically we're moving within a bear market, and given the
trend towards a strong yen, people who want to buy stocks have no
choice besides defensive shares," said Koichi Ogawa, chief
portfolio manager at Daiwa SB Investments.
                                
 "There's not a lot of good news out there, not a lot of
buying factors. One of the only possibilities is the fact that
December has traditionally been a good month for stocks both here
in Japan and overseas."
                                
 The benchmark Nikkei <.N225> gained 49.34 points to 8,053.44
and the broader Topix <.TOPX> rose 0.1 percent to 799.96.
                                
 Investors were hesitant to buy ahead of major events
including Friday's announcement of U.S. jobs data and a decision
on the fate of the Big Three U.S. automakers.
                                
 Committees in the U.S. Congress are scrutinising auto company
restructuring proposals and an urgent appeal for $34 billion in
aid ahead of make-or-break hearings, which start on Thursday.
They will also question the chief executives of General Motors
Corp <GM.N>, Ford Motor Co <F.N> and Chrysler LLC.
[ID:nN02292976]
                                
 Moody's Investors Service downgraded the debt ratings of GM
to Ca from Caa2 and said the outlook was negative.
"It's inevitable that this will have a negative impact on
Japanese carmaker shares as well," said Hiroaki Kuramochi, head
of the equity division at Tokai Tokyo Securities Co Ltd.
                                
 But other market players said that they were still grappling
with the implications of the whole potential bailout and that it
was hard for this to be a significant until more is clear.
                                
 AUTOS DENTED, DEFENSIVES BUOY
                                
 A key factor was the yen's movements against the dollar, with
market players saying the Nikkei was likely to be pushed down
should the dollar venture below 93 yen, as it did on Wednesday
when it touched a five-week low.
                                
 By midday it was edging higher, fetching around 93.33 yen
<JPY=>.
                                
 Honda slid 2.8 percent to 1,747 yen and Toyota Motor Co
<7203.T> slipped 0.5 percent to 2,785 yen. Nissan Motor Co
<7201.T> fell 2.6 percent to 304 yen.
                                
 Honda has lost 16 percent this week and Toyota 7.2 percent,
both battered after a report issued on Tuesday showed U.S. auto
sales had plunged in November to their lowest level since 1982.
[ID:nL2340060]
                                
  Nippon Oil jumped 13.8 percent to 364 yen and Nippon Mining
Holdings rose 13.7 percent to 291 yen.
                                
 The two firms said they would hold board meetings during the
morning to discuss the merger. The combined market capitalisation
of the firms was 706 billion yen ($7.6 billion) based on
Wednesday's closing share prices.
                                
 Nippon Mining and Nippon Oil said they would hold a briefing
on an integration at 0300 GMT. [ID:nTKU003215]
                                
 Eisai <4523.T> climbed 3.9 percent to 3,240 yen and fellow
drugmaker Astellas Pharma Inc <4503.T> rose 2.4 percent to 3,880
yen.
                                
 Fast Retailing <9983.T> extended gains on robust November
same-store sales at its domestic Uniqlo casual-clothing chain,
climbing 8.6 percent to 11,720 yen after surging 10.2 percent on
Wednesday.
                                
 Daiwa Institute of Research raised its rating on the stock to
"3" from "4", saying the Uniqlo chain will likely maintain its
leading position for some time.
                                
 Trade picked up, with 792 million shares changing hands on
the Tokyo Exchange's first section compared with last week's
morning average of 779 million.
Advancing shares outpaced declining ones, 838 to 722.
 (Reporting by Elaine Lies; Editing by Hugh Lawson)