Nikkei falls 0.5 pct on profit-taking, Hitachi dips

TOKYO, Aug 2 (Reuters) The Nikkei average fell 0.54 percent on Wednesday on selling in recent gainers such as Sony Corp., while Hitachi Ltd. sank after a report that a power company would seek damages over the shutdown of a nuclear power plant.

U.S. data showing an uptick in inflation raised expectations that the Federal Reserve will raise rates for an 18th straight time at its meeting next week, and this sent investors in Japan to the sidelines, market analysts said.

''Whether there will be a long-awaited halt in tightening or not is yet to be known, though the meeting is only a few days ahead, and so is whether it will be the last hike if the Fed goes ahead (with tightening),'' said Susumu Abe, manager at Mito Securities' information and investment department.

''Things are too uncertain for investors to keep up with their positions,'' he said.

The Nikkei average was down 86.76 points at 15,354.15 as of 0109 GMT. The TOPIX index was down 0.58 percent at 1,557.86.

Major companies to announce earnings later in the day include Toray Industries, Mitsubishi Motors, Mitsubishi Materials and McDonald's Japan Hitachi, Japan's biggest industrial electronics maker, slid 5.4 percent to 679 yen.

The Nihon Keizai business daily said on Wednesday that Chubu Electric Power Co., Japan's No. 3 utility, plans to seek compensation of more than 100 billion yen (0 million) from Hitachi, claiming the shutdown of a power plant was caused by flaws in Hitachi's turbine design.

Sony fell 1.7 percent to 5,140 yen, retreating for a second session after strong quarterly results propped up the stock to a two-month closing high on Monday.

Mitsubishi Estate Co. Ltd., Japan's second-biggest real estate firm, fell 1.7 percent to 2,340 yen a day after hitting a three-week closing high.

The paper sector was in favour, with second-ranked Nippon Paper Group Inc. rising 2.3 percent to 453,000 yen on hopes that an industry consolidation would improve product supply balance.

Shares of Hokuetsu Paper Mills Ltd. climbed 6 percent to 831 yen after top paper maker Oji Paper Co. Ltd. said on Tuesday it would go ahead with a tender offer for Hokuetsu, even if the smaller company tries to thwart the hostile bid by issuing shares to a third party.

Oji's offer will run from Wednesday to Sept. 4, offering 860 yen per Hokuetsu share if the smaller company scraps a 30 billion yen (0 million) stock sale to trading house Mitsubishi Corp.

If Hokuetsu does issue stock to Mitsubishi, Oji said it will lower its offer to 800 yen per share to account for dilution.

REUTERS VJ BST0706