(Repeats to fix format)
* Nikkei falls 1.1 pct after sharp rally on Wednesday
* Insurers fall as merger report underlines harsh conditions
* Banking shares slip back after rally
By Aiko Hayashi
TOKYO, March 12 (Reuters) - Japan's Nikkei average fell 1.1
percent on Thursday, as insurers slid after a merger report and
bank shares gave up some gains that had helped lift the benchmark
almost 5 percent the previous day.
NipponKoa Insurance <8754.T>, Japan's No. 5 non-life insurer,
tumbled more than 8 percent after the Nikkei business daily said
it would merge with No.3 Sompo Japan Insurance <8755.T>.
It would be the second deal in less than two months for the
country's slumping insurance industry. []
"Market falls were in store for us as it's hard to expect
gains two days in a row, considering current market conditions,"
said Fumiyuki Nakanishi, manager at SMBC Friend Securities.
"The merger report is not something that investors
particularly liked. The deal is aimed at survival in the
shrinking market, as opposed to forward-looking mergers and
acquisitions such as those taking place overseas or in growth
areas."
In relatively active trade, the benchmark Nikkei <>
slipped 79.02 points to 7,297.10. It gained 4.6 percent on
Wednesday, its biggest percentage rise in six weeks, a day after
posting a 26-year closing low.
The broader Topix <> declined 2.2 percent to 706.35.
The market largely shrugged off data showing Japan's economy
shrank a slightly revised 3.2 percent in the last quarter of last
year. That confirmed the sharpest contraction since the oil
crisis in 1974 and economists warn of further contractions in the
next two quarters. [][]
"The slight upward revision, helped by the inventory
contribution and public spending, is pretty much as expected,"
said Takeshi Minami, chief economist at Norinchukin Research
Institute.
"The focus now is more on what happens in January-March and
April-June. The economy is likely to show about the same rate of
contraction in January-March, as external demand will continue to
be weak."
BANKS, INSURERS SLIDE
Among banks, Mitsubishi UFJ Financial Group <8306.T>, Japan's
top lender, dropped 4.9 percent to 391 yen. Mizuho Financial
Group <8411.T> slid 2.3 percent to 172 yen and Sumitomo Mitsui
Financial Group <8316.T> lost 4.6 percent to 2,690 yen.
NipponKoa Insurance tumbled 8.4 percent to 608 yen, while
shares of Sompo Japan gained 4.6 percent to 482 yen.
After the morning close, a source familiar with the matter
said that Sompo Japan and NipponKoa are in talks to merge.
[]
Other insurers fell, with Tokio Marine <8766.T> losing 5.5
percent to 1,914 yen and Mitsui Sumitomo Insurance <8725.T>
sinking 6.1 percent to 1,935 yen.
Automakers fell after a rally the previous day and as the
dollar fell 0.5 percent to 96.81 yen <JPY=> after dropping 1.5
percent on Wednesday. Investors fret over a stronger yen as it
eats into exporters' profits when repatriated.
Honda Motor Co <7267.T> skidded 6.3 percent to 2,070 yen and
Toyota Motor Corp <7203.T> slid 2.1 percent to 2,850 yen.
Some 968 million shares changed hands on the Tokyo Stock
Exchange's first section, compared with last week's morning
average of 946 million.
Declining stocks outpaced advancing ones by 2 to 1.
(Editing by Edwina Gibbs)
