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Japan's Nikkei falls as tech stocks drag; auto shares shine



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TOKYO, Dec 18 (Reuters) -Japan's Nikkei share average fell on Wednesday, as technology stocks tracked Wall Street's weak finish overnight, while a report of a Honda-Nissan tie-up boosted auto shares.

The Nikkei .N225 had slipped 0.21% to 39,281.06 by the midday break and was on track for a fourth straight session of declines.

U.S. stocks retreated on Tuesday and the Dow dropped for a ninth straight session, as investors exercised caution ahead of the Federal Reserve's last policy announcement of the year after economic data indicated consumer spending remained solid. .N

Technology start-up investor SoftBank Group 9984.T fell 3.43% and chip-making equipment maker Tokyo Electron 8035.T inched down 0.25%.

The broader Topix .TOPX edged up 0.12% to 2,731.48, with the auto sector .ITEQP.T rising 1.58% to become the top gainer among the Tokyo Stock Exchange's 33 industry sub-indexes.

Honda Motor 7267.T and Nissan Motor 7201.T are moving towards a closer tie-up with talks of setting up a holding company, a source said, in the clearest sign yet of reorganisation in Japan's auto industry in response to immense challenges posed by Tesla TSLA.O and Chinese rivals.

"The report raised expectations that Japan's automakers will start a consolidation and investors were prompted to buy auto shares," said Fumio Matsumoto, chief strategist at Okasan Securities.

"The market did not expect the closertie-up between Nissan and Honda would take place this early. Now, investors expect less competitive automakers, such as Mazda, may be a target for an acquisition."

Shares of Nissan surged 22%, while those of Honda rose 2.3%. Mitsubishi Motors 7211.T jumped 13% and Mazda Motor 7261.T gained 3.86%.

Okasan's Matsumoto said the Nikkei's gains would be limited toward the end of the year, with foreign investors going on holidays.

"But losses will be limited as well, because of the share buybacks by Japanese firms," he said.



Reporting by Junko Fujita; Editing by Subhranshu Sahu

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