Japan's Nikkei average edges down in thin trade

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By Taiga Uranaka

TOKYO, March 28 (Reuters) - Japan's Nikkei average slipped 0.1 percent in thin trading on Friday, pulled down by Honda Motor Co Ltd (7267.T) and tracking overnight falls on Wall Street.

Financials fell with Japan's third-largest bank Sumitomo Mitsui Financial Group (8316.T) losing 1.7 percent amid fresh concerns about the health of the U.S. financial sector.

Oil and gas field developer Inpex Holdings Inc (1605.T) extended gains on a continued rally in crude prices, offsetting some of the market's overall losses.

The market was moving in a narrow range, with investors hesitant to build up large positions in either direction in the final days of the business year.

"As you can see, the market lacks direction, and investors are taking a wait-and-see attitude," said Kenichi Hirano, operating officer at Tachibana Securities.

"There are few selling since those who had to liquidate positions ahead of the end of the business year had done so last week."

The benchmark Nikkei .N225 ended the morning session down 7.08 points at 12,597.50. The broader TOPIX lost 0.1 percent to 1,225.77.

"Investors are waiting to see how much profit decline Japanese companies forecast for the next business year and where the dollar's slide stops," said Yoshihiro Ito, fund manager at Okasan Capital Management.

"The current political situation, including tax bills and the Bank of Japan governor issue have also put a lid on market gains."

Honda Motor fell 1.3 percent to 2,945 yen, among the top drags on the Nikkei. Inpex gained 2.7 percent to 1.16 million yen.

Mitsui Sumitomo Financial Group fell 1.7 percent to 676,000 yen and No. 1 Mitsubishi UFJ Financial Group (8306.T) lost 1 percent to 868 yen.

U.S. banks fell on Thursday on rumors that Lehman Brothers LEH.N could suffer a fate similar to the near collapse of Bear Stearns BSC.N, which Lehman called "totally unfounded."

Trade was light, with some 695 million shares changing hands on the Tokyo stock exchange's first section compared to last week's average morning volume of 973 million.

Declining shares beat advancing ones by 837 to 700. (Editing by Gary Crosse)