Nikkei down 0.4 pct as oil fall dents trading firms

(Updates with stocks, details) By Aiko Hayashi

TOKYO, May 28 (Reuters) - Japan's Nikkei stock average slipped 0.4 percent on Wednesday as oil's fall from record highs pressured commodity-linked shares such as trading firm Mitsubishi Corp (8058.T).

A notable exception to the overall fall was Oki Electric Industry Co (6703.T), which shot up 7.1 percent to 225 yen, after the Nikkei business daily said that Rohm Co (6963.OS) plans to buy the semiconductor operations of Oki for about 100 billion yen ($959 million).

Kenichi Hirano, operating officer at Tachibana Securities, said the market had opened higher after a solid finish by U.S. stocks, but it lacked energy to pursue further gins, with the benchmark Nikkei already topping the key 25-day moving average on Tuesday.

"Now the market is moving on delicate demand and supply conditions, such as relations between bonds and stocks, and currencies and stocks," he said.

The benchmark Nikkei average .N225 fell 56.78 points to end the morning session at 13,836.53, after advancing 1.5 percent the previous day.

The broader Topix index shed 0.5 percent or 7.00 points to 1,361.25.

Oil extended losses on Wednesday after falling $4 to $128 a barrel the previous day, dented by the stronger dollar and concerns moves to cut Asian fuel subsidies could hurt demand growth. [O/R]

"A fall in oil prices is bad news for trading houses and resource-related stocks, but stabilising oil prices are positive for the overall market," saidKoichi Ogawa, chief portfolio manager at Daiwa SB Investments.

"Still, the Japanese market is in a consolidation stage in the short-term," he said.

The benchmark Nikkei has gained nearly 20 percent since a year-low hit in mid-March.

TRADING HOUSES HURT

Mitsubishi Corp lost 2.9 percent to 3,640 yen and Mitsui & Co (8031.T) declined 2.6 percent to 2,580 yen, as Japan's top trading firms invest heavily in overseas oil fields and mines.

Nippon Oil (5001.T), Japan's largest oil distributor, shed 3.7 percent to 759 yen and oil explorer Inpex Holdings (1605.T) lost 3.1 percent to 1.27 million yen.

Shares of Rohm slipped 1.1 percent to 6,540 yen.

The deal between Rohm and Oki Electric would create Japan's seventh-largest semiconductor maker in terms of sales and would mark the first major realignment in Japan's chip industry since Hitachi Ltd (6501.T) and Mitsubishi Electric Corp (6503.T) merged their system chip operations in 2003, the Nikkei newspaper said. [ID:nT192169]