(fiscal cliff refers to the economic effects that could result from tax increases)
* MSCI Asia ex-Japan inches up 0.2 pct
* US set for last-minute scramble to avert "fiscal cliff"
* Nikkei hits 21-month high as yen slips to two-year low vs dollar
* European shares likely reopen from holidays with a drop
By Chikako Mogi
TOKYO, Dec 27 (Reuters) - Asian shares rose on Thursday amid caution as U.S. lawmakers prepared to resume negotiations to avoid a fiscal crunch by Dec. 31, while the yen hit a 21-month low against the dollar on the prospect of drastic monetary easing and massive state spending.
European shares were seen returning from the Christmas holiday break with a fall, financial spreadbetters predicting London's FTSE 100, Paris's CAC-40 and Frankfurt's DAX would open down as much as 0.6 percent.
A 0.1 percent gain in U.S. stock futures suggested a firm Wall Street start.
MSCI's broadest index of Asia-Pacific shares outside Japan was up 0.3 percent, with Australian shares also adding 0.3 percent. Hong Kong shares rose 0.4 percent to a near 17-month high, although Shanghai steadied after earlier touching their highest level since July.
In a sign that there may be a way to break the deadlock in the U.S. Congress, Republican House of Representatives Speaker John Boehner urged the Democrat-controlled Senate to act to pull back from the cliff and offered to at least consider any bill the upper chamber produced.
U.S. President Barack Obama will try to revive budget crisis talks which stalled last week when he returns to Washington on Thursday after cutting short his Christmas holiday in Hawaii.
"There is no easy way to resolve the U.S. fiscal cliff, but there should be a compromise at some point and that's what the market is looking for," said Tetsu Emori, a commodity fund manager at Astmax in Tokyo.
Economists warn that the "fiscal cliff" of higher taxes and spending cuts worth $600 billion could hurl the world's largest economy into recession, dragging other economies with it.
Such concerns underpinned the dollar as the fiscal impasse continues to sap investor appetite for risky assets, raising the dollar's safe-haven appeal.
"Most risk assets will probably remain range-bound until we get a clearer indication of what to expect from the fiscal cliff negotiations," said Stan Shamu, a strategist at IG Markets.
There were some signs of economic improvement in the Asian region, with data showing profits earned by China's industrial companies jumped 22.8 percent in November from a year earlier, accelerating from October's 20.5 percent.
London copper rose 1.7 percent to a one-week high of $7,932 a tonne on the positive data from China, the world's top copper buyer.
U.S. crude futures inched up 0.2 percent to $91.14 a barrel on hopes the new Japanese government's policies would spur demand. Brent crude steadied at $111.03.
However, South Korea warned on Thursday of only a modest recovery in the economy next year. India's economic growth could get stuck at 5-5.5 percent if a policy logjam continues, said Montek Singh Ahluwalia, a key policy adviser to Prime Minister Manmohan Singh.
YEN SALES ACCELERATE
Against the yen, the dollar at 85.87 yen reached its highest since September 2010, with investors accelerating their yen sales after new Japanese Prime Minister Shinzo Abe said his government would pursue bold monetary policy, flexible fiscal policy and a growth strategy to encourage private investment.
Abe has pledged to make his top priority beating deflation and taming the strong yen, which are dragging down the world's third biggest economy.
The yen is on track for a drop of more than 10 percent this year, its steepest since 2005. It also fell to a 16-month low against the euro at 113.65 yen on EBS on Thursday.
The weaker yen, a boon for Japanese exporters, lifted the benchmark Nikkei stock average 0.9 percent to close at its highest since March 2011. It is on track to log its best yearly gain since 2005.
"People are putting on some positions based on what we saw after the cabinet appointment and LDP policy decision," a dealer at a foreign brokerage said, referring to the ruling party.
("fiscal cliff=effects that could result from tax increases)
The yen is expected to stay under pressure given the new government's clear resolve to prevent it rising. Japan's top government spokesman said recent yen declines were a reversal of past "one-sided" gains in the Japanese currency.
"I'm still bullish on the dollar/yen quite a bit," said a trader for a U.S. bank in Singapore. "In this thin market, I think anything can happen. But definitely I wouldn't go against the trend. The trend is quite clear at this point in time."
New Japanese Finance Minister Taro Aso said the prime minister had ordered him to compile a stimulus package without adhering to the previous government's 44 trillion yen ($519 billion) cap on new bond issuance.
The benchmark 10-year Japanese government bond yield rose to three-month highs of 0.80 percent, while lead 10-year JGB futures hit a three-month low of 143.48.