Japan stocks eye GDP, U.S. stock slide weighs

TOKYO, May 19 (Reuters) Japanese stocks will take their direction from economic growth data for the January-March period to be released before the opening on Friday, with the figures also set to determine which stocks investors will target.

Stronger growth than expected in Japan's gross domestic product in the quarter could encourage bargain-hunting on some stocks, but aggressive buying is likely to be curbed by weakening investor confidence after declines in U.S. stocks.

''The Nikkei may not be able to hold the 16,000 level if the market only takes into account worsening external factors, namely a fall in U.S. stocks,'' said Yumi Nishimura, manager at Daiwa Securities SMBC's investment advisory section.

''But if the GDP data confirms that Japan's economy maintains its growth trend, the market may shift its focus to the domestic economy and restore some gains,'' she said.

Traders expect the Nikkei average to move between 15,900 and 16,100 on Friday.

It fell 1.35 percent to 16,087.18 on Thursday. It briefly breached the 16,000 level for the first time since March.

In Chicago, Nikkei futures expiring in June closed at 15,965, a decline of 105 points from the Osaka finish.

Investors will likely pick up stocks depending on main contributing sectors to the GDP data, Nishimura added.

In a Reuters poll, the average forecast of 26 economists for January-March GDP was for annualised growth of 1.1 percent.

Japan's economy grew at an annualised rate of 5.4 percent in the October-December quarter.

However, U.S. stocks extended losses on Thursday after a heavy sell-off on Wednesday as concern about inflation and rising interest rates kept investors wary. The tech-laden Nasdaq is stuck in in its longest losing streak in 12 years.

The Bank of Japan ends its two-day policy-setting meeting on Friday. No change is expected, but investors are cautiously awaiting the central bank's assessment of the economy in its monthly report as well as comments by Governor Toshihiko Fukui at a post-meeting news conference.

Japan's earnings season is nearing an end. Major banks, the last group to report, are to announce results next week. Few major firms are scheduled to release full-year earnings on Friday.

STOCKS TO WATCH -- Millea Holdings Inc.

The Nihon Keizai business daily said on Friday Millea, Japan's biggest non-life insurer, plans to make Nisshin Fire&Marine Insurance Co. a 100-percent subsidiary. Millea now holds a 30 percent stake in Nisshin, the paper said.

-- Sanyo Electric Co.

Japan's third-biggest consumer electronics maker posted a large annual loss on Thursday due to restructuring costs, asset write-downs and sluggish sales, but it forecast a stronger-than-expected recovery this year.

-- Chugai Pharmaceutical Chugai, majority-owned by Roche Holding, is betting high on new cancer drugs recently being filed for approval in Japan, projecting fast growth through and after 2010, its president told reuters in an interview on Thursday.

-- Sumitomo Realty&Development Co. Ltd.

Japan's third biggest real estate firm on Thursday reported record profit for the year ended in March due to strong sales in its apartment building and office leasing businesses, and forecast stronger-than-expected growth this year.

Reuters SK GC0524