GLOBAL MARKETS-Nikkei hits 9-mth peak; eyes on BOJ rate meeting

SINGAPORE, Jan 18 (Reuters) Japan's Nikkei reached a nine-month high amid talk of a merger in the drugs sector and resource stocks climbed on Thursday as oil prices recovered, but Apple Inc.'s cautious earnings outlook pressured some Asian tech stocks.

The yen was steady near a 13-month low against the dollar, and Japanese government bonds inched down ahead of a keenly awaited Bank of Japan interest rate decision due later in the day.

Crude oil recovered ground as cooler weather rekindled heating demand in the United States, after slipping on Wednesday to a 20-month low just above .

Tokyo's benchmark Nikkei average touched a nine-month high of 17,408.62 and ended the morning session up 0.5 percent. Hong Kong's Hang Seng rose 0.2 percent and MSCI's index of non-Japan Asian shares was 0.4 percent higher at 0240 GMT.

Drugs firm Tanabe Seiyaku Co. Ltd. rose 4.6 percent after it said it was considering a merger with Mitsubishi Pharma Corp, lifting Japan's drugs sector. Click on for more details.

''The drug stocks are up due to investors' expectations of consolidation in the industry...,'' said Tsuyoshi Nomaguchi, strategist of Japanese equity research at Daiwa Securities.

But investors sold Japanese technology stocks following a 0.74 percent drop in the U.S. Nasdaq and after shares of Apple slipped in after-hours trading on its outlook for the current quarter, which lagged analysts' expectations.

Chip-gear maker Tokyo Electron Ltd. shed 1 percent percent.

In Taipei, however, the focus was on Apple's strong profit in the fourth quarter Apple supplier Foxconn rose 0.5 percent.

YEN CRUNCH The yen inched higher against the dollar but stayed close to a 13-month low, as last-minute speculation that the Bank of Japan could keep interest rates steady weighed on the low-yielding currency.

Sources, not at the central bank but familiar with the BOJ's thinking, told Reuters late on Wednesday that it was likely to forgo a rate hike, wanting more time to assess the strength of consumption and a possible pick-up in weak consumer prices.

''If a decision to hold off from raising rates is confirmed I think there is a good possibility that the yen will come under some more selling pressure,'' said Masafumi Yamamoto, currency strategist for Nikko Citigroup in Tokyo.

The dollar stood at 120.50 yen down slightly from around 120.65 yen in late U.S. trading and near a 13-month low of 120.88 yen reached on Wednesday.

Traders said the dollar was likely to rise to 121 yen if the BOJ keeps interest rates unchanged as most investors now expect.

The Bank of Japan meeting normally ends sometime between noon (0300 GMT) and 1 p.m. (0400 GMT) but when policy changes are made, it has tended to last until around 2 p.m. (0500 GMT).

Expectations of a rate rise had been growing, but doubts set in this week.

Heavyweight resource stocks were higher. BHP Billiton put on 0.9 percent. The MSCI's index of energy stocks outside Japan climbed 1.0 percent, and the materials componement rose 0.7 percent.

Crude oil rose 36 cents a barrel to .60 on cooler weather in the United States and ahead of weekly U.S. inventories data. Prices hit a 20-month low on Wednesday after Saudi Arabia said OPEC output cuts were working well and an emergency meeting of the producer group was unnecessary.

Gold reached a two-week high at 3.20 as the dollar lost ground.

Japanese government bond (JGB) prices slipped, pulling back from a sharp rally in the previous session on the view the Bank of Japan will likely hold rates steady.

A fall in U.S. Treasuries and an auction of 30-year JGBs later in the session were also keeping JGBs on the back foot.

The yield on the benchmark 10-year JGB rose 2.5 basis points to 1.705 percent, pulling away from a three-week low of 1.675 percent hit on Wednesday, while the five-year yield inched up half a basis point to 1.215 percent.

In the United States the Dow Jones industrial average closed about flat.

REUTERS SP KP0922