Nikkei at highest close in a month, Bridgestone up

TOKYO, Dec 6 (Reuters) The Nikkei average climbed 0.65 percent on Wednesday to end at its highest close in a month as Bridgestone Corp. rose on its purchase of U.S. firm Bandag Inc., while strong leading economic indicators spurred buying in domestic issues such as bank shares.

Investors also bought shares with high dividend yields such as Kansai Electric Power Co. Inc.

The market picked up steam later in the afternoon after data showing Japan's diffusion index of leading economic indicators rose to a preliminary 50.0 in October from a revised 25.0 in September. It was the first time in four months that the index rose to 50.

''The leading indicators were a positive factor,'' said Toru Otsuka, a deputy general manager in the investment information department at Mizuho Investors Securities Co. Ltd.

The Nikkei was up 105.52 points at 16,371.28, the highest close since Nov. 7. The broader TOPIX index rose 1.02 percent to 1,615.17.

Although some investors remain sceptical about the Japanese economy, Andrew Millward, a fund manager at Henderson Global Investors Japan K.K, said his firm is positive on Japan.

''The Japanese domestic economy is rambling along fairly robustly. We are not seeing fantastically strong economic growth but it's been fairly solid all the way along,'' he said.

Millward said the stock market may see a slow start initially but should pick up later on. He also said he would avoid exporters next year but instead focus on domestic issues such as retail, housing-related and bank shares.

''We are already seeing lending rates rising. From January, mortgages tend to be repriced. As we go into the last quarter of this fiscal year, banks earnings will start to take a bit of upward momentum,'' he said. ''Valuations are still looking cheap.'' Trade volume fell to 1.66 billion shares from 1.84 billion on Tuesday. Advancing shares beat decliners by a ratio of seven to two.

BRIDGESTONE GAINS Bridgestone jumped 3.5 percent to 2,550 yen after Japan's biggest tyre maker said it would pay $1.05 billion in cash for Bandag Inc., a U.S. maker of retreading materials and equipment, to expand its range of services to cost-conscious truck fleets.

Shares of utility firms including Kansai Electric and Tohoku Electric Power Co. Inc. rose to their highest for the year as retail investors bought shares with high dividend yields.

For the year to March 31 next year, listed companies are expected to pay annual dividends of a record 4.49 trillion yen ($39 billion), up 10 percent on the year, according to the Nihon Keizai Shimbun.

Idemitsu Kosan Co., Mitsubishi Corp. and Mitsui & Co. rose after they said on Wednesday that an alliance of Idemitsu and Mitsubishi would tie up with Mitsui to consolidate their liquefied petroleum gas import terminals to reduce distribution costs.

Idemitsu rose 0.7 percent, Mitsubishi Corp climbed 2.2 percent and Mitsui added 2.8 percent.

REUTERS PV HS1307