* Nikkei down 0.6 pct on yen, falls in Chinese shares
* Sentiment still bullish, helped by charts, output data
* Turnover slips to 1.08 bln shares -- lowest since 2008
By Chikafumi Hodo
TOKYO, Dec 28 (Reuters) - Japan's Nikkei average slipped 0.6 percent on Tuesday as falls in Chinese shares and a slightly firmer yen prompted light profit-taking, but it was supported by strong Japanese output data and healthy technical signals.
The Nikkei was rangebound in thin year-end trading as investors were less enthusiastic about taking more buy positions after a 0.8 percent gain the previous day.
"The Nikkei was capped by falls in Shanghai shares and a slight recovery of the yen. The Nikkei could have risen if Chinese shares gained today as market sentiment is still bullish," said Toshiyuki Kanayama, a market analyst at Monex Inc.
"We've seen funds flowing into small-cap shares today, but the market simply didn't have enough energy to rise as there weren't enough active players."
The benchmark Nikkei finished the day down 63.36 points at 10,292.63.
The broader Topix index fell 0.2 percent or 1.85 points to 902.83.
Daily trading volume fell to the lowest since December 2008, with 1.08 billion shares changing hands on the Tokyo Stock Exchange's first section.
Turnover in value terms fell to 719.2 billion yen ($8.69 billion) -- the lowest since Jan. 4.
Hong Kong shares fell 1.1 percent as the market resumed trading from a holiday the previous day and absorbed the weekend credit-tightening by China's central bank.
Shanghai shares fell 1.3 percent by late afternoon, extending falls after slipping 1.9 percent on Monday.
The Nikkei was also pressured as the yen firmed about 0.5 percent against the dollar to 82.44 by late Asian trade, but the market was careful about selling the Nikkei too strongly as the underlying trend remained bullish.
UPBEAT DATA
Tokyo participants were looking for chances to test the Nikkei above last year's close of 10,546.44 by this year's final trading day on Thursday, analysts said.
Bullish technical signals and positive Japanese output data released on Tuesday also provided bargain-hunting opportunities, they said.
Industrial output rose 1.0 percent in November, marking the first rise in six months, in a sign companies are increasing production on expectations for a pickup in global demand early next year.
"The market has so far shown little reaction to the industrial output figures, but this is clearly positive for the outlook," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley Securities.
"More positive data, which would signal an improvement in shipments and falls in inventories, could provide support to the electronics and machinery sectors," Yamagishi said.
Manufacturers surveyed by the Ministry of Economy, Trade and Industry expect industrial output to rise 3.4 percent in December and 3.7 percent in January, the data showed.
Shares of Anges MG surged 8.7 percent to 122,700 yen after it and Shionogi & Co announced they had agreed to work together on research and development for a treatment for atopic dermatitis and other skin disorders.
Shionogi fell 0.1 percent to 1,609 yen.
Mizuho Financial Group rose 1.3 percent to 155 yen after its chief executive told Reuters the bank can meet additional capital requirements without raising funds if it becomes subject to stricter global rules under consideration for banks deemed "too big too fail."
Dai-ichi Life Insurance Co rose 2.1 percent to 133,600 yen. Japan's second-largest life insurer said after the close that it plans to buy all the shares it does not already own in midsize life insurer Tower Australia Group Ltd for 99.6 billion yen ($1.2 billion). ($1=82.78 yen) (Reporting by Chikafumi Hodo; Editing by Chris Gallagher)