Nikkei inches up to 2-month high, SoftBank Group drops

* Nikkei up 0.1 pct, Topix 0.28 pct on Sino-U.S. trade hopes

* Defensive shares, such as railway firms, utilities, leadgains

* Soft Reuters tankan data weighs on manufacturers' shares

* SoftBank Group falls on report of complaints on tech funds

By Hideyuki Sano and Tomo Uetake

TOKYO, Feb 19 (Reuters) - Japanese shares ticked up to newtwo-month highs on Tuesday on hopes of a breakthrough inU.S.-China trade talks, though the gains were led by defensiveshares as investors remained cautious on the global economicoutlook.

Nikkei share average .N225 edged up 0.10 percent to21,302.65, its highest close since mid-December.

The broader Topix .TOPX added 0.28 percent to 1,606.52, also the highest in two months.

SoftBank Group9984.T shares dropped 3.3 percent, afterthe Wall Street Journal reported that its key investors,including Saudi Arabia's sovereign wealth fund, were unhappywith the high valuation of its flagship Vision Fund.*:nL5N20D4H9

Overall, markets were without firm directional cues as were shut on Monday for a holiday, but sentimentremained broadly positive with investors looking for clues fromtrade negotiations between Washington and Beijing.

A new round of talks between the United States and China toresolve their trade war starts in Washington on Tuesday, andlater this week will involve top-level officials, the WhiteHouse said on Monday.*:nS0N1XH00F

Tsuyoshi Shimizu, head of research at Asset Management One,said he does not want to buy shares of Japanese exporters atpresent.

"But I think domestic demand-led firms will do well becausethe government is likely to take lots of steps to support theeconomy to counter the planned hikes in consumption tax," hesaid.

Shimizu added that earnings expectations "have fallen a bittoo much. It seems like markets expect Japanese corporateearnings to fall about five percent in the next financial year,but I do think they can grow by almost 10 percent."

Defensive shares advanced on Tuesday with East Japan Railway9020.T and Central Japan Railway9022.T rising 2.0 percentand 1.6 percent, respectively.

Utility shares were another bright spot, with Chubu ElectricPower 9502.T climbing 2.7 percent and Tokyo Gas9531.T 2.2percent.

Many manufacturers were softer as investors remain wary thatslowdowns in China and elsewhere could hurt their top line.

Robot maker Fanuc6954.T fell 0.3 percent and Panasonic6752.T dropped 0.7 percent.

The latest Reuters monthly tankan, which showed corporatesentiment in February slipped to the lowest levels since late2016, also weighed on investor sentiment.

The monthly poll found manufacturers' mood sliding for afourth straight month and service-sector morale falling for thefirst time in four months, in a sign companies took a hit fromweakening demand both at home and abroad amid slowing globalgrowth and trade frictions.**:nT9N1Y702P

Trade was light with turnover .VM1.T at 1.857 trillion yen ($16.78 billion), one of the lowest in recent months and 27.5percent below the average for the past year.($1 = 110.6700 yen) (Editing by Jacqueline Wong and Richard Borsuk) ((; +81 3 6441 1827; ReutersMessaging:

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