Nikkei dips in thin trade, shrugs off GDP

                                
 * Nikkei edges down 0.2 pct, some exporters dip
                                
 * Mostly shrugs off GDP as numbers in line with expectations
                                
 * Defensive shares up in thin trade, U.S. markets closed
                                
 * Nippon Paper says considering to buy Australian Paper
 (Adds stocks, details)
                                
 By Elaine Lies
                                
 TOKYO, Feb 16 (Reuters) - Japan's Nikkei stock average edged
down 0.2 percent on Monday, shrugging off data showing Japan's
economy suffered its biggest fall in over three decades while a
stronger yen weighed on exporters such as Canon Inc <7751.T>
                                
But the overall market got a boost from gains in a wide array
of defensive shares such as drugmaker Daiichi Sankyo <4568.T> as
investors sought stocks seen as resilient in the face of
economic distress.
Nippon Paper Group Inc <3893.T>, Japan's second-largest
paper maker, rose 2.2 percent after saying on Monday it was
considering buying Australian Paper from Australia's Paperlinx
Ltd <PPX.AX>. [ID:nT97347]
                                
 Japan's economy shrank 3.3 percent in the fourth quarter,
the biggest drop since 1974 and further confirmation that the
world's second-biggest economy is in a severe recession as the
global economic crisis deepens. [ID:nT365714]
                                
 The gross domestic product figure translated into an
annualised fall of 12.7 percent, more than economists' median
forecast for an 11.7 percent contraction.
                                
 But market players said the grim data was not unexpected and
had largely been factored in, limiting losses.
                                
 "The GDP data was a little below expectations but everyone
knew it was going to be bad, and the U.S. stimulus package looks
set to be enacted, so people aren't selling that much," said
Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.
                                
 "The fact that exports have really fallen will have a
chilling effect, but domestic demand hasn't fallen that much at
this point and Japanese consumption still hasn't been hit that
hard yet. But the future is a worry."
                                
 The yen gained against the dollar after the data was
released just prior to the opening, and this advance was having
a greater direct impact on the market than the GDP figures,
which market players said were basically old news.
                                
 "Although the fourth quarter figures were as expected, the
economic performance in the first quarter of 2009 is a concern,
and could again show a double-digit (annualised) decline," said
Yoshiki Shinke, senior economist at Dai-Ichi Life Research
Institute.
                                
 "It is hard to predict when the economy will begin
recovering. The poor performance mostly stems from the drop in
exports and Japan will not be able to recover until overseas
demand picks up," said Shinke.
                                
 The benchmark Nikkei <.N225> briefly ventured into positive
territory but ultimately shed 16.37 points to 7,763.03, while
the broader Topix <.TOPX> gained 0.7 percent to 769.59.
                                
 ECONOMIC GLOOM
"The big question now is what sort of economic measures
might be drawn up to tackle the poor economy," said Noritsugu
Hirakawa, a strategist at Okasan Securities.
                                
 At the weekend, media reports said the Japanese government
and ruling parties are considering a fresh stimulus package that
could include up to 20 trillion yen ($218 billion) in fiscal
spending to bolster the economy. [ID:nT71201]
                                
 While Japanese Economics Minister Kaoru Yosano said on
Monday that Japan was facing its worst economic crisis since
World War 2, he added that the government was not considering
taking additional stimulus steps until parliament passes a
budget for the fiscal year starting on April 1. [ID:nTKX004208]
                                
 Trade was thin with U.S. markets closed on Monday for a
holiday, with investors reluctant to take positions.
                                
 The economic uncertainty sent investors flocking to
so-called defensive and domestic demand shares, with West Japan
Railway <9021.T> rising 3.8 percent to 360,000 yen and other
railway firms also performing well.
                                
 Some chip-related shares rose after gains in their U.S.
peers, with Tokyo Electron <8035.T> up 1.7 percent at 3,500 yen,
while some large-cap exporters such as Honda Motor Co <7267.T>
also edged higher.
But other exporters and tech firms fared poorly.
Canon slipped 1.2 percent to 2,415 yen, while TDK Corp
<6762.T> fell 3 percent to 3,580 yen and Kyocera Corp <6971.T>
lost 1.7 percent to 5,780 yen.
                                
 Trade was thin on the Tokyo exchange's first section, with
755 million shares changing hands compared to last week's
morning average of 896 million.
                                
 Advancing shares outnumbered declining ones by more than 2
to 1.
                                
 (Editing by Brent Kininmont)