* Nikkei rises 0.1 pct, Topix flat * Expectations of domestic pension funds' buying support market * Hydrogen fuelling stations-related shares jump By Tomo Uetake TOKYO, July 7 (Reuters) - Japanese shares were little changed near 5-1/2-month highs on Monday but underpinned by expectations of domestic pension funds' buying, which has been a major driving force behind the market's rally in the last two months.
The benchmark Nikkei average gained 0.1 percent to 15,445.68 points, after rising as high as 15,477.77, not far from Friday's high of 15,490.37.
Many market players expect the $1.24 trillion Government Pension Investment Fund (GPIF) to buy more shares as Prime Minister Shinzo Abe has been pressing the enormous fund to seek higher returns for Japan's rapidly ageing population by pumping more money into stocks.
"The government cannot allow share prices to fall. So it is not a phase to sell shares and there will be buying by public players on dips," said Kyoya Okazawa, the head of global equity and commodity derivatives at BNP Paribas.
The GPIF said on Friday that it had 15.88 percent in Japanese equities at the end of March, higher than 14.05 percent a year ago, but still below a level of around 20 percent which many investors see as its future target.
Buying by three, smaller "semi-public" pension funds has been considered as a major driving force behind the market's rise in the past two months.
Tokyo shares were also helped by optimism on the U.S. and global economy, and as Wall Street shares trade at all-time highs.
U.S. markets were closed on Friday for the Independence Day holiday. U.S. jobs numbers for June, which were released on Thursday, smashed forecasts and raised expectations that the world's biggest economy was on a stronger recovery path.
Trading was slower than usual due to the U.S. market holiday, leaving Japanese retail traders as the main players.
They jumped on to hydrogen-related shares after Toyota announced last month that it will launch hydrogen fuel cell vehicles next March.
Mitsubishi Kakoki Kaisha, a company with market capitalisation of a mere $350 million, had bigger turnover than Toyota, becoming the third-heaviest traded stock by turnover.
Its shares rose as much as 16 percent, and have gained a whopping 156 percent in less than two weeks. The company builds hydrogen fueling stations.
Convenience store operator Familymart was the top performer on the main board, rising 4 percent after trading house Itochu Corp announced it was buying 5.35 percent of Familymart shares to strengthen business ties between the two firms.
Itochu was down 1.3 percent.
Kyushu Electric Power Co Inc jumped as much as 3.6 percent to hit a four-month high following media reports that the company was expected to pass a milestone in its journey to restart two reactors at the Sendai nuclear plant idled in the wake of the Fukushima nuclear disaster.
On the other hand, retailer Aeon fell 4.3 percent after it posted weak earnings on Friday. Its March-May operating profit fell 35 percent from a year earlier.
The broader Topix was little changed at 1,284.76, while the JPX-Nikkei Index 400 shed 0.1 percent to 11,663.55.
(Editing by Eric Meijer & Kim Coghill)
