Nikkei climbs 7.7 pct on BOJ rate cut talk

*Nikkei climbs 7.7 pct on BOJ rate cut talk

*Honda, other exporters gain helped by softer yen

*Sony says Q2 profit down 90 pct after close (Adds stocks, details)

By Aiko Hayashi

TOKYO, Oct 29 (Reuters) - Japan's Nikkei average climbed 7.7 percent in volatile trade on Wednesday, with exporters such as Honda Motor (7267.T: Quote, Profile, Research, Stock Buzz) climbing after the yen weakened on expectations that the Bank of Japan will cut interest rates later this week.

Trade was active but choppy, with the benchmark Nikkei climbing, then paring gains before ending at the day's high.

Japan's central bank is considering cutting rates from an already low 0.5 percent at Friday's policy meeting, a source told Reuters.

If it did pull the trigger, it would join an expected round of rate cuts in coming days as central banks grapple with a darkening global economic outlook. [ID:nT150850]

"The reports about the BOJ's rate cut helped trigger short covering, but that alone is not sufficient reason for investors to keep buying stocks," said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC.

"Even if the BOJ did cut rates, that wouldn't improve economic fundamentals, leaving the market still at the mercy of supply and demand, and currency moves."

Some market analysts said it had simply been time for a rebound, given how far the Nikkei had fallen.

The Nikkei's slide to a 26-year low drove its price-to-book ratio below 1 to 0.87 as of Monday, a rare development that means the value of all companies in the index is below the total value of the assets they hold.

The ratio had never been below 1 until this month, according to Thomson Reuters data going back to 1991.

The benchmark Nikkei .N225 added 589.98 points to finish at 8,211.90. It has gained 14.6 percent over the past two days.

The broader Topix .TOPX jumped 5.9 percent to 830.32.

An early report from the Nikkei business daily about a possible central bank rate cut in Japan helped Wall Street mark its second-best day ever on Tuesday. [.N]

"When you look at Japan's economic health alone, the Bank of Japan doesn't need to cut interest rates. I also doubt whether a rate cut would stem yen rises," said Koichi Haji, chief economist at NLI Research Institute.

"Still, a rate cut would send a message to the world that Japan is cooperating with other nations in tackling the financial crisis."

EXPORTERS JUMP, NOMURA SLIDES

The dollar fell 0.5 percent from late U.S. trade to 97.50 yen after having surged as high as 99.79 yen on trading platform EBS but it remained well above the 13-year low of 90.87 yen struck last week.

Major exporters such as Honda, Panasonic Corp (6752.T: Quote, Profile, Research, Stock Buzz) and Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz), all of which announced results this week, have based their earnings projections on a dollar rate of 100 yen and a euro rate of 135 yen.

Honda soared 18.2 percent to 2,440 yen despite cutting its annual operating profit forecast by 13 percent. [ID:nT151521]

Toyota surged 10.4 percent to 3,500 yen, while Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz) jumped 6.9 percent to 2,730 yen.

Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz) ended up 2 percent at 2,035 yen. After the closing bell, it posted a 90 percent fall in quarterly profit as growing worries about the global economy sent the yen higher and hit camera sales.[ID:nT126558]

Among declining stocks, Nomura Holdings Inc (8604.T: Quote, Profile, Research, Stock Buzz) dropped 5 percent to 861 yen, the top drag on the Nikkei 225. Japan's top brokerage posted its third consecutive quarterly net loss on Tuesday as financial market turmoil led to big trading losses and a drop-off in deals.

Trade was active on the Tokyo exchange's first section, with 2.98 billion shares changing hands, compared with last week's daily average of 2.38 billion.

Advancing stocks outpaced declining ones by more than 5 to 1. (Additional reporting by the Tokyo newsroom; Editing by Edwina Gibbs)