GLOBAL MARKETS-Yen down on Japan's new govt; US shares slip

* U.S. markets up slightly, awaiting Congress

* Yen at 20-month low vs dollar, boosts Nikkei to 9-month

high

* European markets closed

* MSCI Asia ex-Japan little changed on low trading volume

NEW YORK/TOKYO, Dec 26 (Reuters) - The yen fell to a

two-year low against the dollar on Wednesday after Japan swore

in a new prime minister who has called for weakening the

currency to stimulate inflation, while U.S. stocks slipped in

thin trading.

The dollar rose as high as 85.74 yen on trading

platform EBS, the highest since September 2010, following the

swearing-in of Shinzo Abe as premier and was last at 85.65. The

euro rose as high as 113.40 yen, a 16-month high, up

1.4 percent. The euro was at $1.3223 against the dollar,

up 0.3 percent.

Abe is calling for a mix of aggressive monetary policy

easing and big fiscal spending to beat deflation and weaken the

yen. He is pressuring the Bank of Japan to adopt a 2 percent

inflation target that would auger for a weaker currency,

threatening changes at the central bank if his wishes are not

met.

"The election of Abe has had a galvanizing effect on the

dollar/yen exchange rate and he has been able to accomplish more

in two months of jawboning than the BoJ has... over the past

several years," said Boris Schlossberg, managing director of FX

strategy at BK Asset Management in New York.

U.S. shares were slightly lower in post-Christmas trading,

picking up from losses on Monday, as Congress looks likely to

fail to negotiate a deal to avoid the "fiscal cliff," a series

of $600 billion in spending cuts and tax hikes that would slow

the U.S. economy sharply unless lawmakers take action.

A U.S. official said on Tuesday that President Barack Obama

may return to Washington from his Hawaiian holiday as early as

Wednesday evening to resume talks.

With odds increasing that Congress will not come to an

agreement before the end of the year, a series of big decisions

will wait until early 2013, when tax rates are scheduled to rise

for most Americans. Economists warn that the world's largest

economy could fall into recession if the automatic tax hikes and

spending cuts are not offset in some way.

U.S. stocks have held in a tight range, recovering losses

sustained just after the U.S. election in November. The S&P 500

is still up about 13 percent on the year.

"No one is hitting the panic button yet and part of that

lack of panic selling is the notion that (Wall) Street is

getting comfortable with the likelihood of a temporary fix for

the fiscal cliff - something that gets us over the date of Jan.

1 in a way where it can be re-addressed," said Peter Kenny,

managing director at Knight Capital in Jersey City, New Jersey.

There is some concern that the impending tax hikes cut into

holiday spending in the United States. Holiday-related sales

were up 0.7 percent from Oct. 28 through Dec. 24, compared with

a 2 percent increase in 2011, according to MasterCard Advisors

SpendingPulse.

The Dow Jones industrial average dropped 53.68

points, or 0.41 percent, at 13,085.40. The Standard & Poor's 500

Index was down 9.13 points, or 0.64 percent, at 1,417.53.

The Nasdaq Composite Index was down 27.69 points, or

0.92 percent, at 2,984.91.

Many markets remained closed following Christmas. European

exchanges were largely shuttered, and Hong Kong and Australia

were also closed. The MSCI All-World Index was

down 0.15 percent on Wednesday.

U.S. single-family home prices rose in October for the ninth

month in a row. The S&P/Case Shiller composite index of 20

metropolitan areas gained 0.7 percent in October on a seasonally

adjusted basis, stronger than the 0.5 percent rise forecast by

economists polled by Reuters.

Ten-year U.S. Treasury notes rose 8/32 of a point in price

to yield roughly 1.7476 percent. The U.S. bond

market was closed on Tuesday for Christmas.

Brent crude climbed above $110 per barrel on

Wednesday, hitting a two-month high, with investors hoping for a

last-minute deal to avoid a U.S. fiscal crisis. U.S. crude

futures gained $2.30, or 2.6 percent, to $90.91.

YEN WEAKENS

The weaker yen has bolstered hopes for better earnings from

Japanese companies and underpinned the Nikkei, which has gained

about 18 percent since mid-November, when the election was

scheduled. The yen has lost nearly 8 percent against the dollar

in the same period.

The Nikkei closed at a nine-month high on Wednesday,

with a 1.5 percent gain.

Minutes of the BOJ's policy-setting meeting in November,

released on Wednesday, showed that some board members said the

central bank must act decisively, without ruling out any policy

options, if the outlook for the economy and prices worsens

further.

MSCI's broadest index of Asia-Pacific shares outside Japan

was little changed. Shanghai shares were

flat, but stayed in positive territory on the year after a 2.5

percent jump on Tuesday erased 2012 losses. It is set for a

first annual gain in three years.

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