Nikkei set to fall on Wall Street loss, political uncertainty

Men are reflected on a stock quotation board displaying the Nikkei share average outside a brokerage in Tokyo May 16, 2011.

TOKYO (Reuters) - The Nikkei average is expected to fall on Thursday after Wall Street shares posted their biggest fall in 10 months and amid growing prospects of a split in Japan's ruling party.

A former prime minister joined the swelling ranks of ruling party rebels trying to oust Prime Minister Naoto Kan, raising the risk that a no-confidence vote will pass in parliament on Thursday forcing him to quit.

"I think the Nikkei will give up about half of its strong gains of the past two sessions," said Takashi Hiroki, chief strategist at Monex Securities.

"But given that Japanese shares have not risen much as U.S. shares, their fall may be limited," he added.

The Dow Jones industrial average fell 2.2 percent on Wednesday, a dismal start for June, a month that is historically weak for equities after both private payroll data and key manufacturing survey missed estimates..N

Nikkei futures in Chicago ended at 9,530, down 90 points from their Osaka close.

The benchmark Nikkei .N225 climbed 0.3 percent to 9,719.61 On Wednesday, extending its gain of 2 percent the previous day to close at its highest level in three weeks.

The broader Topix index .TOPX edged up 0.1 percent to 839.41.

Analysts said the Nikkei is expected to trade between 9,500-9,650 on Thursday.

(Reporting by Hideyuki Sano; Editing by Michael Watson)