* Yen hovers near 13-year high vs dollar, hits exporters
* BOJ rate cut expectations mount before Dec. 18-19 meeting (Adds details)
By Rika Otsuka
TOKYO, Dec 17 (Reuters) - Japan's Nikkei average climbed 0.5 percent in see-saw trade on Wednesday, supported by gains in banks such as Sumitomo Mitsui Financial Group (8316.T: Quote, Profile, Research, Stock Buzz) after the U.S. Federal Reserve cut interest rates to near zero.
But overall market gains were limited, with the Nikkei dipping into negative territory at one point, as a stronger yen hit exporters including Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz).
Honda tumbled more than 4 percent on concern about its earnings. After the close, the automaker cut its annual operating profit forecast by 67 percent, as a deepening financial crisis hammers global car demand and sends the yen soaring. [ID:nT208548]
"The Fed's stance that it's willing to take bold steps and do everything in its power to deal with the situation helped boost the market," said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC.
The benchmark Nikkei .N225 added 44.50 points to 8,612.52, after rising more than 2 percent in morning trade. The Nikkei fell nearly 2 percent in the afternoon as the yen crawled towards a 13-year high against the dollar, stoking worries over Japanese exporters' profits. [FRX/]
"Currency moves will likely keep stock investors jumpy for a while," said Toshiyuki Kanayama, a market analyst at Monex Inc.
The broader Topix .TOPX gained 1.2 percent to 838.46, following an overnight rally on Wall Street after the Fed lowered borrowing costs to a record low.
In a unanimous vote, the Fed made a larger-than-expected cut to the the benchmark federal funds rate and pledged it would use all available means to revive the U.S. economy from its deepest recession in generations. [ID:nN21494092]
WILL BOJ FOLLOW SUIT?
Monex's Kanayama said investor attention has shifted to whether the Bank of Japan will lower the overnight call rate -- currently at 0.3 percent -- to 0.1 percent at its two-day policy meeting starting on Thursday.
"Expectations that the BOJ will follow the Fed's move are mounting as the yen could appreciate more if the central bank stands pat," Kanayama said.
Exporters are feeling the pinch from the yen's surge as they had made business plans for the current fiscal year based on the assumption that the dollar would move around 100 yen. A stronger yen curbs Japanese exporters' overseas profits when they are repatriated.
Banking stocks rose, with No. 2 bank Mizuho Financial Group (8411.T: Quote, Profile, Research, Stock Buzz) climbing 3.2 percent to 237,500 yen, while Sumitomo Mitsui Financial Group jumped 4.4 percent to 354,000 yen.
Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz), Japan's biggest bank, rose 2.2 percent to 519 yen. Its arm Mitsubishi UFJ Trust & Banking said on Tuesday that it would buy NikkoCiti Trust & Banking, Citigroup's (C.N: Quote, Profile, Research, Stock Buzz) Japanese trust bank. [ID:nT290822]
Among automakers, Honda dropped 4.2 percent to 1,891 yen. Nissan Motor Co Ltd (7201.T: Quote, Profile, Research, Stock Buzz) fell 4.1 percent to 302 yen after the company said it would cut domestic output for the business year to March by an additional 78,000 units from January. [ID:nTKF003209]
Drugmakers gained as investors targeted shares seen as relatively resilient in the face of the economic downturn. Astellas Pharma Inc (4503.T: Quote, Profile, Research, Stock Buzz) jumped 5.7 percent to 3,510 yen.
Trade was moderate on the Tokyo exchange's first section, with 2.1 billion shares changing hands, compared with last week's daily average of 2.3 billion.
Advancing stocks slightly outnumbered declining ones, 815 to 769. (Reporting by Rika Otsuka; Additional reporting by Aiko Hayashi; Editing by Chris Gallagher)
