Tokyo stocks seen up on U.S. gains, dividend plays

TOKYO, Mar 16 (Reuters) Japanese stocks are expected to open higher on Thursday after gains in US stocks on a favourable Federal Reserve report and as investors look for stocks with higher dividends.

But a fall in trading volume in Tokyo recently as the end of Japan's fiscal year looms this month has raised some doubts about the strength of the market's momentum.

''Stocks with higher dividends keep luring investors ahead of the fiscal year end,'' said Masayoshi Okamoto, head of dealing at Jujiya Securities.

''Apart from such picking-up of individual stocks, I don't think the market has a clear trend on which way to go,'' he said.

Traders expect the Nikkei share average to move between 16,250 and 16,400 on Thursday.

On Wednesday it rose 0.5 percent to 16,319.04 on advances in firms that have increased their dividend forecasts, such as Nomura Holdings Inc.

In Chicago, Nikkei futures expiring in June closed at 16,310, a rise of 70 points from the Osaka finish. On Tuesday the U.S.

S&P 500 index broke above 1,300 for the first time since May 2001, and all three major U.S. indexes skirted five-year highs.

Some market participants are also concerned that higher costs of borrowing could trim earnings after the yield on 10-year Japanese government bonds rose to 1.725 percent on Wednesday, its highest level since August 2004.

The Bank of Japan last week scrapped its five-year super-easy monetary policy, marking the possible start of a tightening cycle.

Although the BOJ said then it would keep short-term interest rates at zero for now, there are growing expectations that the bank could raise rates sooner than previously thought.

The monthly Reuters Tankan survey of business confidence is due before the opening. The survey is seen as a clue to gauge the results of the BOJ's quarterly tankan survey.

BOJ Governor Toshihiko Fukui is scheduled to make a speech after the market closes on Thursday.

The Tokyo stock exchange is still shortening overall afternoon trading by 30 minutes to avoid computer system problems. Trade will begin at 1 p.m. (0400 GMT) instead of the usual 12:30 p.m. and will finish at 3 p.m.

STOCKS TO WATCH -- Canon Inc.

Canon will likely beat its January-March group net profit forecast, helped by strong sales of digital cameras and colour copiers, the Nihon Keizai business daily said on Thursday.

-- Usen Corp.

The cable broadcaster will acquire Fuji Television Network Inc.'s 12.75 percent stake in embattled Internet firm Livedoor Co., the Nihon Keizai said on Thursday.

-- Toyota Tsusho Corp.

The trading firm will be added to Nikkei 225 share average on March 28, index compiler Nihon Keizai Shimbun Inc. said. Also to be added is INPEX Holdings, a holding company to be created in April in the merger of oil developer INPEX Corp. and Teikoku Oil Co.

-- Sony Corp.

The electronics and entertainment conglomerate said on Wednesday it would delay the release of its new PlayStation 3 video game console until early November because development of some of the technology was behind schedule.

-- NEC Corp.

Japan's third-largest electronics conglomerate said on Wednesday Kaoru Yano, senior executive vice president, will become president on April 1, replacing Akinobu Kanasugi, who has health problems.

-- Nippon Oil Corp.

Japan's largest refiner said on Wednesday it would cut its imports of Iranian crude by 15 percent this year, the first hint Tehran's nuclear dispute with the West is affecting its vital oil trade.

-- TEAC Corp.

The maker of computer disk and CD-ROM drives said it and electronics maker Pioneer Corp. had agreed to co-develop recordable DVD drives for laptop computers, in the latest move by Japanese electronics makers to counter the tough price competition in the industry.

REUTERS SK RAI0530