* Investors cautious ahead of U.S. data

* Upbeat mood intact, but market pauses after rally

* Hitachi jumps on report of lithium ion batteries

By Aiko Hayashi

TOKYO, July 2 (Reuters) - Japan's Nikkei average fell 0.6 percent on Thursday, dented by a fall in blue-chip shares as caution set in ahead of U.S. jobs data, but Hitachi (6501.T: Quote, Profile, Research) jumped on a report it will boost production of lithium ion batteries for hybrid cars.

Market analysts said the Nikkei was due for a pause after recovering some 40 percent from its March lows, though the mood remained upbeat, reinforced by reassuring manufacturing data from Europe, China and the United States.

"The market is at a standstill right now after overshooting recently and as it's just under 10,000. It will likely spend July and August -- the summer months when trade is thin -- consolidating around the 10,000 level," said Fumiyuki Nakanishi, manager at SMBC Friend Securities.

The benchmark Nikkei .N225 closed down 63.78 points at 9,876.15. On Wednesday, it briefly touched its highest in about two weeks above 10,000 before ending the day slightly lower.

The broader Topix .TOPX slipped 0.5 percent to 924.02.