* Nikkei up 0.27%, Topix almost flat
* Investors prefer defensives amid trade war uncertainties
* Rakuten gains on cashless service expansion
By Hideyuki Sano
TOKYO, June 6 (Reuters) - Japan's Nikkei eked out small gains on Thursday but the market was hampered by concerns about the U.S. trade war with Mexico and China, prompting investors to buy domestic-demand oriented shares.
The Nikkei share average rose 0.27% to 20,832.46 though the index was propped up disproportionately by rises in its top two heavyweights, Softbank Group and Fast Retailing, which rose 3.4% and 2.8% respectively.
The broader Topix, which investors say more accurately reflects the market, was almost flat, up 0.03% at 1,530.59.
"Although expectations of rate cuts by the Federal Reserve have led to rallies in U.S. shares, Japanese shares are benefitting less because U.S. rate cuts would strengthen the yen," said Masahiro Ayukai, senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities.
The Japanese yen hit a five-month high on Wednesday.
Worries about trade wars U.S. President Donald Trump is waging on many fronts hampered semiconductor shares and other exporters.
Murata Manufacturing fell 2.3% while TDK dropped 2.5% and Taiyo Yuden 2.4%.
Nissan Motor fell as much as 3.8% and Mitsubishi Motor up to 4.7% after Fiat Chrysler said it had abandoned its $35 billion merger offer for Renault, the alliance partner of the two Japanese firms.
Uncertainties over the global trade environment goaded investors to seek refuge in defensive and domestic demand-oriented shares, with the wider adoption of cashless services by the government and companies offering a good theme for investors to latch on to.
Rakuten jumped 6.5% after the internet company announced a tie-up with East Japan Railway on cashless services.
East Japan Railway rose 1.0% while West Japan Railway hit a near four-year high, having risen as much as 2.6% at one point.
Line, which also offers rival electronic settlement services, gained 4.1%.
Elsewhere, drugmaker Dai-ichi Sankyo extended its recent gains on optimism over its cancer drug, rising 1.6% and hitting a record high.
Drugstore chain operator Cocokara Fine rose 7.8%, extending its gains so far this week to 34%, as it has become a target of alliance by two of its bigger rivals, Sugi Holdings and Matsumotokiyoshi.
Park 24 jumped 4.5% in heavy trade as the operator of parking spaces extended its recovery since the company's earnings announcement at the end of last month. (Editing by Jacqueline Wong)