Nikkei up 1.6 pct, Aozora Bank and Shinsei rally

                                
 *Nikkei hovers near 25-day moving average
                                
 *Aozora Bank and Shinsei Bank climb on merger talks
                                
 *Mitsubishi Electric jumps on report of solar plans
                                
 By Masayuki Kitano
                                
 TOKYO, June 25 (Reuters) - Japan's Nikkei stock average rose
1.6 percent on Thursday, with Aozora Bank and Shinsei Bank
rallying on news that they were in merger talks and tech shares
tracking their U.S. peers higher.
                                
 Mitsubishi Electric Corp <6503.T> surged 7.2 percent after
the Nikkei business daily said the company plans to build plants
in the United States and Europe to assemble solar power
generation systems using solar panels shipped from Japan.
                                
  Shares such as Tokyo Electron <8035.T> rose after their U.S.
tech peers drew strength in the wake of stronger-than-expected
quarterly results from software maker Oracle Corp <ORCL.O>.
[ID:nN22517610]
                                
 The U.S. Federal Reserve kept interest rates at nearly zero
as widely expected on Wednesday, and gave no hint on an imminent
exit from bold policy easing. [ID:nN24163547]
                                
 There were no major surprises from the Fed's policy meeting,
said Nagayuki Yamagishi, strategist for Mitsubishi UFJ
Securities.
But the conclusion of the event removed an element of
uncertainty, helping to spur some short-covering in Tokyo shares,
Yamagishi said.
                                
 Investors had been keenly awaiting the Fed's policy
statement, nervous about the risk that the Fed could hint at
interest rate hikes.
                                
 The Nikkei rose 151.55 points to 9741.87 <.N225>, edging up
above its 25-day moving average, which now lies right around
9,700.
                                
 The 25-day moving average is a closely watched technical
level among Japanese equities traders, and had acted as support
for the Nikkei over the course of its three-month rally since
March.
                                
 But the Nikkei had fallen below the average earlier this
week, turning it into a resistance level.
                                
 The broader Topix rose 1.5 percent to 916.34 <.TOPX>.
                                
 Mitsubishi Corp <8058.T> and other trading houses gained
after prices of metals climbed overnight, with copper rising 3
percent after U.S. durable goods orders for May were better than
expected, raising hopes the U.S. economy may be on the mend.
[ID:nSP467098]
                                
 Mitsubishi Corp gained 4.1 percent to 1,811 yen and Mitsui &
Co <8031.T> rose 4.0 percent to 1,159 yen.
                                
 Aozora Bank <8304.T> and Shinsei Bank <8303.T>, hurt by
soured investments and exposure to subprime loans, said on
Thursday they are in talks to merge, in a deal that would create
Japan's sixth-largest bank.
                                
 It was the first time the two money-losing lenders have
confirmed the talks, after sources told Reuters last month that
the banks were discussing a merger. [ID:nT239763]
                                
 Aozora Bank climbed 5.8 percent to 147 yen and Shinsei Bank
rose 7.6 percent to 156 yen.
                                
 Mitsubishi Electric Corp <6503.T> climbed to 610 yen and
Tokyo Electron rose 4.1 percent to 4,570 yen.
                                
 Advancing shares outnumbered declining ones by more than 5 to
 1. Trade lightened, with 1 billion shares changing hands on the
Tokyo Exchange's first section compared to last week's morning
average of 1.3 billion.
 (Additional reporting by Elaine Lies; Editing by Edwina Gibbs)