* Trust banks may be buying Topix - analysts * Nikkei off 1.0 pct for week, off 1.7 pct for month * Pioneer tumbles after dissolving alliance with Sharp By Ayai Tomisawa TOKYO, Aug 29 (Reuters) - Japan's Nikkei share average fell on Friday morning as tensions in the Ukraine conflict flared up again, but hopes that domestic investors would start buying up large-cap stocks limited the losses.
The Nikkei dropped 0.5 percent to 15,376.16 in mid-morning trade. For the week, the Nikkei has fallen 1.0 percent and it is down 1.7 percent for the month.
The broader Topix outperformed, however, and was off 0.3 percent at 1,277.01 after briefly flirting with positive territory earlier - spurring speculation that of index-buying by domestic investors.
Toyota Motor Corp gained 0.5 percent, Honda Motor Co added 0.4 percent and Sony Corp rose 0.6 percent. Major bank Sumitomo Mitsui Financial Group advanced 1.0 percent.
"We can assume that domestic investors such as trust banks are buying as public funds usually do their index-buying activity on the Topix index," said Isao Kubo, equity strategist at Nissay Asset Management. "It doesn't seem like today's gains in these shares are from foreign investors and hedge funds." The Tokyo Stock Exchange data released on Thursday showed trust banks, which act on behalf of public investors, bought a net 40.8 billion yen of cash stocks last week after a net purchases of 81.4 billion yen in the prior week.
Market participants also said reduced foreign investor activity was likely linked to the long weekend ahead in the U.S., where markets will be closed for Labor Day on Monday.
The overall mood in markets was undermined after Ukraine's president said Russian troops had entered his country in support of pro-Moscow rebels who captured a key coastal town, sharply escalating a five-month-old separatist war.
Index-heavy shares lost ground, with Fast Retailing Co falling 1.3 percent and Fanuc Corp shed 1.8 percent.
Pioneer Corp dropped 2.7 percent after it and Sharp Corp said that they had agreed to dissolve their capital alliance in the optical disk business.
The new JPX-Nikkei Index 400 dropped 0.4 percent to 11,579.11.
(Editing by Shri Navaratnam)
