Nikkei up 0.4 pct after BOJ tankan shows optimism

TOKYO (Reuters) - Japan's Nikkei rose 0.4 percent on Monday as investors bought Fanuc Ltd and other large-cap shares after the Bank of Japan's tankan survey showed manufacturers remained optimistic despite turmoil in global credit markets.

The tankan's headline diffusion index for big manufacturers' sentiment was plus 23, slightly above the market's median forecast of plus 22 and matching the previous survey's reading in June.

Stocks dipped briefly at the open and then recovered, helped by rises in large-cap shares including Kyocera Corp

Still, market participants said the tankan's impact on the market would probably be limited.

"It's neither negative or positive. While the tankan shows relatively solid sentiment at hand, it points to a weak outlook," said Yusuke Sakai, manager of equities trading at Mizuho Securities.

The diffusion index for big manufacturers' sentiment for December was seen at plus 19, showing the firms expect conditions to worsen over the next three months for the fifth straight quarter.

With few leads to determine the moves of the overall market, investors are shifting their focus on earnings of individual companies, Sakai said.

"Investors are aggressively dumping shares of companies with poor earnings such as IHI and Fuji Electric and buying solid ones like Fanuc," Sakai said.

The benchmark Nikkei ended the morning session up 65.66 points at 16,851.35. The broader TOPIX index was up 0.1 percent at 1,618.54.

Trade slowed with 780.6 million shares changing hands on the Tokyo exchange's first section, compared with last week's morning average of 876.2 million. Advancing stocks beat declining ones by 867 to 714.

Among gainers, casual clothing retailer Fast Retailing Co Ltd rose 3.3 percent to 6,850 yen, and industrial robot maker Fanuc rose 1.6 percent to 11,900 yen.

Shares of Mitsubishi Motors Corp jumped 5.7 percent to 185 yen after the automaker tripled its group operating profit forecast for the first half on Friday.

Shares of Fuji Electric Holdings Co Ltd were untraded as sell orders overwhelmed buy orders, quoted at 412 yen, down 20 percent from Friday's close, after the company cut its group operating profit forecast for the year to March 2008 by 23 percent.

IHI SCARE

Shares of IHI were untraded due to a glut of sell orders after the heavy machinery maker slashed its annual earnings outlook on Friday to forecast an operating loss on problems in its energy plant division and said it may revise that even lower.

IHI's sharp downward revision came as costs for large-scale projects turned out larger than its estimates. The news spooked investors, sending down other plant-related shares.

Chiyoda Corp, a plant engineering company, fell 2.9 percent to 2,010 yen. JGC Corp shed 2.9 percent to 2,150 yen. Heavy machinery and engineering firm Hitachi Zosen Corp fell 5.8 percent to 163 yen.

Shares of Uniden Corp were up 10.6 percent at 842 yen after the Nikkei business daily reported on Saturday the maker of cordless telephones and satellite broadcasting receivers would beat its annual profit forecast on cost cuts and productivity gains.