* Nikkei claws to highest close since Sept 25
* JAL tumbles on growing concern about future
* Bank shares down on profit-taking, policy uncertainty
By Elaine Lies
TOKYO, Oct 16 (Reuters) - Japan's Nikkei stock average clawed up 0.2 percent on Friday to a three-week closing high as gains in retailers and drug firms narrowly offset losses in banks and Japan Airlines, which tumbled for a second day straight. Cash-strapped JAL fell over 11 percent, taking its losses this week to some 26 percent, with concerns about the size and content of a rescue package also contributing to pressure on banking shares. Sources told Reuters earlier this week that JAL has asked its creditors for a total of 600 billion yen in financial aid as part of a restructuring plan, including debt forgiveness and debt-for-equity swaps.
"There's increasing concern about the future of the company and whether it's heading for a GM-style bankruptcy or not," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management.
Tech shares slid in afternoon trade on profit-taking, pushing the Nikkei briefly into negative territory, though some in the market said the benchmark was showing surprising resilience.
"I think expectations of good results for Japanese companies have enabled the Nikkei to do unexpectedly well this week considering all the things that it has faced, including the yen's strength that we saw earlier this week," said Tomomi Yamashita, a fund manager at Shinkin Asset Management.
"But of course this means that once results are out we could see selling on a lack of fresh incentives, and also perhaps disappointment if hopes are not fulfilled."
Others attributed the market's strength to a sense that the gradual improvement in global share markets would inevitably buoy Tokyo, which is not rising as fast as other markets.
"The pace of economic recovery seems to be better than expected, as shown by strong U.S. tech earnings, and global stock markets are trending upwards," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.
But by late afternoon the market had largely run out of energy, with investors reluctant to buy ahead of the weekend and amid concerns about whether Wall Street would hang onto the gains that took the Dow over 10,000 this week for the first time in a year.
The benchmark Nikkei edged up 18.91 points to 10,257.56, its highest close since Sept 25. The broader Topix, which is less tech-heavy, fell 0.4 percent to 900.95.
JAL WOES
JAL was the biggest drag on the Nikkei 225, losing 11.4 percent to 101 yen. Japan's transport minister said the draft plan for JAL's restructuring was progressing smoothly and again pledged government support.
In addition to worries about JAL, banks also succumbed to profit-taking after results from Goldman Sachs Group and Citigroup Inc failed to match the high standards set by JPMorgan Chase & Co and worries about a loan moratorium proposed by Banking Minister Shizuka Kamei.
Fitch Ratings commented that concerns may emerge over the soundness of Japanese banking institutions if debt-relief programmes are put in place, noting that it was concerned about the ultimate impact on banks' asset quality and profitability.
Top lender Mitsubishi UFJ Financial Group lost 3.1 percent to 470 yen, No. 3 bank Sumitomo Mitsui Financial Group fell 1.9 percent to 3,190 yen, and Mizuho Financial Group, Japan's second-largest bank, lost 1.2 percent to 172 yen. All were off earlier lows.
Tech shares slid on profit-taking after gains last week, with Tokyo Electron Ltd losing 3.3 percent to 5,610 yen and Advantest, a maker of chip testing devices, down 1.4 percent to 2,465 yen.
But a broad array of defensive shares such as retailers and drug firms gained ground, with Fast Retailing, operator of the casual clothing chain Uniqlo, climbing 5.5 percent to 15,320 yen. Sony Corp gained as well, rising 1.9 percent to 2,650 yen, with market players attributing its gain to a ratings hike by Citigroup.
Trade was thin, with 2 billion shares changing hands on the Tokyo exchange's first section compared to last week's daily average of 2.1 billion.
Declining shares outnumbered advancing ones by 933 to 607. (Reporting by Elaine Lies; Editing by Joseph Radford)