(Updates with closing prices)

TOKYO, Dec 18 (Reuters) - Japan's Nikkei share average

fell for a fourth session on Wednesday as investors remained

cautious ahead of central bank decisions in the U.S. and Japan,

while report of a Honda-Nissan tie-up boosted auto shares.

The Nikkei ended 0.72% lower at 39,081.71.

The broader Topix erased early gains to fall 0.31%

to 2,719.87, even as the auto sector rose 1.5% on

expectations for an industry reorganization.

Honda Motor ( HMC ) and Nissan Motor ( NSANF ) are in talks

to deepen ties, two people said, including a possible merger,

the clearest sign yet of how Japan's once seemingly unbeatable

auto industry is being reshaped by challenges from Tesla and

Chinese rivals.

"The report raised expectations that Japan's automakers will

start a consolidation and investors were prompted to buy auto

shares," said Fumio Matsumoto, chief strategist at Okasan

Securities.

"The market did not expect the closer tie-up between Nissan ( NSANF )

and Honda ( HMC ) would take place this early. Now, investors expect

less competitive automakers, such as Mazda ( MZDAF ), may be a target of

an acquisition."

Nissan ( NSANF ) surged 23.7% to a daily limit, while Honda ( HMC ) fell 3%.

Mitsubishi Motors ( MMTOF ) jumped 19.65% and Mazda Motor ( MZDAF )

gained 5.54%.

U.S. stocks retreated overnight and the Dow dropped for a

ninth straight session as investors exercised caution ahead of

the Federal Reserve's last policy announcement of the year after

economic data indicated consumer spending remained solid.

The Bank of Japan (BOJ) will conclude its policy meeting

on Thursday and announce its decision just hours after the Fed's

expected rate cut.

Uniqlo brand owner Fast Retailing ( FRCOF ) slipped 1.76% to

drag the Nikkei the most. Technology start-up investor SoftBank

Group lost 4%.

Okasan's Matsumoto said the Nikkei's gains would be limited

toward the end of the year, with foreign investors going on

holidays.

"But losses will be limited as well, because of the

share buybacks by Japanese firms."