Nikkei pares gains as optimism wars with yen

* Nikkei pares gains to 1 pct after early bounce

* Exporters pressured as yen remains strong

* Carmakers down on plunging U.S. sales, Honda expansion cuts

* Optimism after Wall St rise fades, investors sidelined (Adds stocks, details)

By Elaine Lies

TOKYO, Dec 3 (Reuters) - Japan's Nikkei average pared gains to 1 percent on Wednesday, with optimism after a Wall Street rally fading as the dollar briefly flirted with the 92-yen level, weighing on exporters such as Sony Corp (6758.T).

Automakers suffered, with Honda Motor Co (7267.T) down 5.5 percent in the face of a sharp drop in U.S. sales and a report by the Nikkei business daily that it is scaling back its overseas expansion plans. Chip equipment makers also struggled.

But defensive shares bucked the downward pressure, with drugmakers and communications firms gaining as investors turned to shares seen more resilient in the face of global economic uncertainty.

"It's all the currency -- and the Bank of Japan doesn't seem to have much of a sense of danger compared to other central banks," said Tomomi Yamashita, a fund manager at Shinkin Asset Management.

"Aside from the currency, there really isn't all that much to worry about right now, and the U.S. could well recover. But because of the strong yen, Japan risks being left behind."

The dollar had clawed up to 93.21 by midday after briefly dipping into the 92-yen level, dampening the Nikkei's early bounce. A strong yen dents profits when repatriated. JPY=

But other market players were guardedly optimistic, pointing to the rebound on Wall Street and encouraging moves concerning the U.S. Big Three automakers.

U.S. stocks rebounded on optimism after global bellwether General Electric (GE.N) pledged to leave its dividend intact, while financial shares gained on a Federal Reserve move to extend several emergency measures integral to stabilising banks.

Additional encouragement came after U.S. automakers submitted survival plans and a top lawmaker predicted Washington would approve a bailout, saying that bankruptcy was not an option. [ID:nN021255]

"Expectations for a Big Three bailout boosted Wall Street, and with Citigroup also basically taken care of, the safety net appears to have been spread," said Takashi Ushio, head of the investment strategy division at Marusan Securities.

"Of course all the worries haven't been completely erased, but it appears as well that markets have become more resilient in the face of bad news than they were a few months ago."