Nikkei edges up as banks gain, Honda and Sanyo drop

(Updates to midday)

TOKYO, Dec 18 (Reuters) - The Nikkei average rose 0.9 percent on Thursday as bank shares extended gains after a rate cut by the U.S. Federal Reserve, though Honda Motor (7267.T: Quote, Profile, Research) dropped after slashing its profit forecasts in its third warning this year.

Panasonic Corp (6752.T: Quote, Profile, Research) rose after Goldman Sachs (GS.N: Quote, Profile, Research) agreed to the electronics giant's offer to buy its stake in Sanyo Electric Co Ltd (6764.T: Quote, Profile, Research), although Sanyo shares fell as the bid was only slightly sweeter than one Goldman rejected earlier this month. [ID:nT242792]

The benchmark Nikkei .N225 added 74.52 points to 8,687.04, after opening down 0.6 percent.

The broader Topix .TOPX gained 0.3 percent to 841.10. (Reporting by Aiko Hayashi)