Nikkei hits highest since May, Toyota rises

TOKYO, Dec 27 (Reuters) The Nikkei share average rose to its highest in more than seven months on Wednesday, with shares of Toyota Motor Corp. hitting a record high following a report that its chairman met with the chief executive of Ford Motor Co.

in a step toward potential partnership talks.

Shares of Nippon Steel Corp. continued to gain on a report the steel maker had reached an agreement with Japan's shipbuilders, allowing it raise steel plate prices by 5 percent next year.

Toyota, the world's most profitable auto maker, was up 2.2 percent at 7,940 after earlier hitting a lifetime high of 7,960.

The company said its chairman, Fujio Cho, had met Ford Chief Executive Alan Mulally but did not discuss the possibility of forming any type of alliance.

The Nihon Keizai business daily reported earlier that Cho and Mulally met last week as a first step in potential partnership negotiations.

But investors nonetheless warmed to the possibility of a tie-up, as it could shield Toyota from a backlash in the key U.S.

market.

''As part of its strategy, Toyota is sweeping across the U.S.

market,'' said Katsuhiko Kodama, senior strategist at Toyo Securities. ''This could be a countermeasure to avert potential criticism (in the United States).'' The Nikkei was up 74.80 points at 17,243.99 as of 0102 GMT after earlier hitting its highest since early May.

The broad TOPIX index was up 0.49 percent at 1,680.59.

Nippon Steel rose 2.5 percent to 658 yen, adding to a gain of 5.1 percent in the previous session. The Nihon Keizai reported on Tuesday the company had reached an agreement with shipbuilders, allowing it to push through its fourth straight yearly price rise.

A company spokesman declined to comment on the report.

Reuters SBA VP0655