Nikkei falls 0.7 pct; Greece, U.S. jobs data eyed

* Mitsubishi Motors sinks after rules out Peugeot capital tie

* Elpida gains, to buy Spansion flash memory assets

* Trade cautious on Greece's fate, before U.S. data - analyst

By Aiko Hayashi

TOKYO, March 4 (Reuters) - Japan's Nikkei average fell 0.7 percent on Thursday, with exporters hurt by worries about a stronger yen, while Mitsubishi Motors <7211.T> dropped after it and France's PSA Peugeot Citroen <PEUP.PA> failed to agree on terms for a capital alliance.

Trade was cautious as investors remained wary ahead of Friday's U.S. jobs data and waited to see how Greece's debt woes will ultimately play out, though encouraging U.S. economic data and hopes for progress on Greece's problems provided support.

"It's not as if investors' sentiment has soured, but it's just that they still can't be bullish enough about the economy to keep pushing up the market," said Kazuhiro Takahashi, general manager at Daiwa Securities Capital Markets.

"Falls in other markets such as Hong Kong are weighing on the Nikkei in the afternoon, but the market here is still basically stuck in a narrow trading range."

The benchmark Nikkei <.N225> was down 73.45 points at 10,179.69 in midafternoon after seesawing between positive and negative territory. The broader Topix <.TOPX> declined 0.6 percent to 900.25.

The dollar held steady at 88.45 yen <JPY=>, after falling as far as 88.32 yen on Wednesday, its lowest since mid-December. Investors fret about a stronger yen as it eats into exporters' profits when they are repatriated.

In other Asian markets, Hong Kong shares <.HSI> were down 0.5 percent and Shanghai shares <.SSEC> fell 1 percent.

The U.S. Institute for Supply Management's gauge of service sector activity and the ADP's report on private employment pointed to a strengthening economy and stabilising labour market. [ID:nN03225657]

Additional support for the market came after Greece's cabinet approved sweeping budget cuts, the country's third savings package in as many months, as it tries to secure European help to tackle its massive debt burden.

The European Union praised the plan and said the country could count on European solidarity, but German Chancellor Angela Merkel, whose backing for any European safety net for Greece will be vital, stopped short of any commitment to financial support. [ID:nLDE6220NA]

Greece's problems have rattled global markets in recent weeks.

MITSUBISHI MOTORS SINKS, EXPORTERS DOWN

Mitsubishi Motors <7211.T> tumbled 9.1 percent to 120 yen after it and Peugeot failed to agree on a capital alliance but said on Wednesday they would continue talking about expanding business ties. [ID:nTOE622063]

Other exporters also fell, with TDK Corp <6762.T> shedding 1.8 percent to 5,390 yen and Kyocera Corp <6971.T> slipping 0.9 percent to 7,980 yen. Honda Motor Co <7267.T> fell 0.7 precent to 3,080 yen.

But Elpida Memory <6665.T> gained 2.2 percent to 1,654 yen after the chipmaker said it was in talks to buy the flash memory assets of U.S. company Spansion <SPSNQ.PK>.

An Elpida spokesman declined to comment on how much the company would spend on the purchase, but the Nikkei business daily reported earlier that Elpida would pay 3-5 billion yen ($34-57 million). [ID:nTOE623003]

Nippon Yusen <9101.T> and other shipping firms climbed after the Baltic Exchange's main sea freight index <.BADI>, which tracks rates to ship dry commodities, rose to an over one-month high on Wednesday with better coal and iron ore cargo demand lifting sentiment. [ID:nLDE6222GA]

Nippon Yusen advanced 1.9 percent to 331 yen and Mitsui O.S.K. Lines <9104.T> rose 1.4 percent to 594 yen. Kawasaki Kisen K.K. <9107.T> gained 2.5 percent to 329 yen. (Editing by Chris Gallagher)