Japan's Nikkei ends up 0.1 pct as drugmakers gain

*Nikkei ends up 0.1 pct, drugmakers gain

*Denso and other Toyota group firms plunge on outlook

*Defensive stocks favoured amid growing economic concern (Adds comments and detail)

By Taiga Uranaka

TOKYO, July 31 (Reuters) - The Nikkei average edged up 0.1 percent on Thursday, as gains in defensive stocks such as drugmakers offset steep falls in Denso (6902.T) and other exporters amid growing concern about the economic outlook and health of corporate earnings.

The market finished in positive territory on the last trading day of the month as investors bought defensive shares, considered less vulnerable to economic swings, but the Nikkei spent most of the day in the negative, dragged down by exporters.

Nintendo Co Ltd (7974.OS) plunged after the video game maker kept its annual outlook well short of market expectations despite its quarterly profit rising 31.5 percent on the runaway success of its Wii game console. [ID:nT18171]

Toyota Motor (7203.T) group companies Denso, Aisin Seiki Co Ltd (7259.T) and Toyota Industries Corp (6201.T) were trounced after cutting their outlooks, casting a cloud over the market.

"Toyota group companies have been giving weak outlooks and there is a growing amount of news pointing to Japan's economic slowdown, which together hurt investor sentiment," said Yoshihiro Ito, senior strategist at Okasan Asset mangement.

"Wall Street was up, the dollar is trading around 108 yen and there had been expectations for month-end window-dressing, but concerns about the macroeconomy and corporate earnings crushed these otherwise positive factors," he said.

In such month-end window dressing, some fund managers buy up shares to increase the value of their positions as they close books for the month, market participants said.

Following dismal results and outlooks from these group firms, some market players were worried that the ongoing disappointing earnings season might culminate with Toyota's results.

"Investors are nervous ahead of Toyota's earnings next week," said Masanobu Takahashi, chief strategist at Ichiyoshi Securities.

"The auto-related sector was expected to be weak, but investors are getting a fresh shock to see the actual figures, and they could get a final blow with Toyota's earnings," he said.

The benchmark Nikkei .N225 ended up 9.02 points at 13,376.81, while the broader Topix .TOPX gained 0.1 percent to 1,303.62.

The Nikkei fell 0.8 percent in July, after dropping 6 percent in June.

"Panics over two things - hyperinflation in emerging markets due to surging oil prices and the U.S. credit crisis triggered by housing loan problems - eased in late July," said Masayuki Kubota, senior fund manager at Daiwa SB Investments.

"As these panics recede, we can expect a rebound in August. But given the global economic situation, which is showing more signs of slowdown, gains are likely to be limited."

DENSO DOWN

Denso plunged 6.5 percent to 2,815 yen, and has lost 10 percent since it reported on Wednesday a more than 20 percent fall in quarterly profits -- considerably worse than expectations.

The world's top auto parts supplier also slashed its forecasts as big cuts in North American vehicle production take their toll. [ID:nT135656]

Mitsubishi UFJ Securities cut its rating on the stock to "3" from "2", citing the risk of a further downward revision to the firm's forecast given that Toyota Motor Corp (7203.T) has cut its 2008 global sales target.

Aisin Seiki fell 5.8 percent to 2,825 yen and Toyota Industries declined 4.9 percent to 3,130 yen.

Takeda Pharmaceutical (4502.T) gained 4.2 percent to 5,750 yen after it raised its full-year forecast by 17 percent. [ID:nT104427]

Rival drugmaker Daiichi Sankyo Co Ltd (4568.T) also climbed 3.9 percent to 3,230 yen even after it reported a 41 percent drop in operating profit for the first quarter and stuck to its full-year forecast of 130 billion yen.

Both were among the top contributors to the Nikkei.

"The focus of trade is shifting towards defensive sectors or stocks that are less affected by external factors, rather than those of a cyclical nature," said Takahiko Murai, general manager of equities at Nozomi Securities.

TDK Corp (6762.T) fell 1.5 percent to 6,500 yen after a source told Reuters TDK plans to buy German electronic parts manufacturer Epcos AG EPCGn.DE for up to $1.9 billion, in a move to expand sales of industrial-use parts. [ID:nT172065]

In Osaka, Nintendo ended down 8.7 percent at 52,600 yen.

Trade picked up, with 2.08 billion shares changing hands, compared with last week's average of 1.9 billion.

Advancing shares beat declining ones by 961 to 649.