*Nikkei gains 0.1 pct in last full trading day of 2008
*On track for first positive month since May
*But Nikkei likely to book worst year ever for 2008
*Non-life insurers up on news of merger talks (Adds stocks, details)
By Elaine Lies
TOKYO, Dec 29 (Reuters) - Japan's Nikkei average edged up 0.1 percent on Monday as non-life insurers rose on news that three of them are in talks to merge, though losses by big-name exporters such as Canon Inc (7751.T) weighed on the market.
Oil and gas field developer Inpex Holdings (1605.T) and other oil-related firms gained on a surge in crude oil, with hopes that economic policies expected to be enacted next year will help prevent a worsening of the global economy supporting some other shares as well.
Mitsui Sumitomo Insurance Group Holdings (8725.T), Aioi Insurance Co (8761.T) and Nissay Dowa General Insurance Co (8759.T) are in talks to merge, a company source said, a move that would create Japan's largest non-life insurer. [ID:nT306947]
In the last full trading day of 2008, the benchmark Nikkei .N225 gained 7.65 points to 8,747.17 in thin trade. It will trade for a half day on Tuesday and reopen on Jan. 5.
The Nikkei is on track to end December up for its first positive month since May. But it is down nearly 43 percent for 2008, likely to be its worst year ever.
Market players said next year could be grim as well.
"There are some very tough forecasts out there for 2009," said Masayoshi Okamoto, head of dealing at Jujiya Securities.
"But the economic policies for the administration of (U.S. President-elect Barack) Obama should be made more clear next year, and there may be benefits for Japanese companies in this, as well as in any economic stimulus plans enacted by China."
Others said Japan's economy in particular may face challenges, noting the Friday release of data showing industrial production plunged a record 8.1 percent in November from the previous month. [ID:nT30071]
"These figures show that manufacturing in Japan may have suffered more damage than that overseas, and given the political uncertainty here as well, Japan may take longer to recover," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.
Almost three quarters of respondents to a media poll published on Monday said they did not support Japanese Prime Minister Taro Aso, who is under fire for policy flip-flops as the country slides into a deep recession
