* Nikkei up 0.6 pct, China rate cut boosts related shares

* Panasonic hits 5-year low after cutting profit forecasts

* October output data stokes recession fears (Adds stocks, detail)

By Rika Otsuka

TOKYO, Nov 28 (Reuters) - Japan's Nikkei average edged up 0.6 percent on Friday, cheered by an interest rate cut China but held back by a plunge in Panasonic Corp (6752.T: Quote, Profile, Research) after a drastic cut in its outlook.

Gains were led by shipping firms such as Kawasaki Kisen (9107.T: Quote, Profile, Research), trading houses such as Itochu Corp (8001.T: Quote, Profile, Research) and construction machinery companies such as Komatsu Ltd (6301.T: Quote, Profile, Research), extending advances made a day earlier after China axed rates by over 100 basis points on Wednesday to prop up growth.

"China-related shares continue to rally on expectations that China's rate cut will support its economy," said Toshiyuki Kanayama, a market analyst at Monex Inc.

Meanwhile, weak output data and the downward revision by Panasonic kept investors careful about chasing prices higher, analysts said.

Panasonic, the world's No.1 plasma TV maker, dived 11 percent after cutting its annual net profit forecast by 90 percent and announcing plans to restructure as the global financial crisis dampens sales of TVs and other electronics. [ID:nLR132843]