Japan stocks fall 1.5 pct on yen gains, bad data

                                
 (Adds stocks, details)
                                
 By Elaine Lies
                                
 TOKYO, Feb 28 (Reuters) - Japanese stocks slid more than 1
percent on Thursday, dragged down by worse-than-expected
industrial output figures and a stronger yen that hit Honda Motor
Corp <7267.T> and other exporters.
Industrial output fell 2.0 percent in January from a month
earlier, government data showed, more than twice the median
market forecast for a 0.8 percent decline. [ID:nT340955]
                                
 But market players said shares didn't fall as much as might
be expected from the line-up of negative factors, with investors
seeming to take heart from hopes of further Federal Reserve
interest rate cuts after comments from Fed Chairman Ben Bernanke
on Wednesday.
                                
 A report that the Japanese government has decided not to seek
limits on foreign ownership of airports this year also helped
bolster the market. [ID:nT92545]
                                
 The transport ministry had been preparing to submit to the
current Diet session a bill including a clause limiting foreign
stake in airports to less than a third of voting shares, but the
Nikkei business daily reported that the bill has been shelved.
                                
 Japan Airport Terminal Co <9706.T>, which runs Tokyo's Haneda
Airport, was up 4.4 percent after the Nikkei report.
                                
 "Japanese stocks have suffered in the past from perceptions
that Japan was a 'closed country,' so this is fundamentally
positive," said Takeshi Osawa,  senior fund manager at
Norinchukin Zenkyoren Asset Management.
                                
 "There's also expectations of U.S. fiscal policy, and that's
providing some support too."
Bernanke signalled further rate cuts to avert a recession,
making clear that the U.S. central bank was more worried about
the risks to growth than inflation. [ID:nN27437254]
                                
 The benchmark Nikkei <.N225> dropped 1.5 percent to 13,823.24
by midsession, shedding 208 points. The broader TOPIX <.TOPX>
lost 1.5 percent to 1,343.47.
The slide was partly due to investors locking in profits from
this week's gains, with issues that had risen sharply suffering
some of the bigger falls.
YEN ADVANCE
The stock market was warily watching moves in the currency
market for any yen gains that could further hurt shares of
exporters.
                                
 The yen edged up slightly against the dollar and has jumped
since the start of the week, climbing through 106 yen on
Wednesday to be back near a three-year peak hit in January.
                                
 The dollar was fetching 106.36 yen <JPY=>, down slightly from
the 106.50 yen marked in late U.S. trade.
The stronger yen took a toll on exporters. Honda slipped 3
percent to 3,340 yen, while Toyota Motor Corp <7203.T> was down
2.8 percent at 5,890 yen. Both were among the top drags on the
Nikkei by volume weight.
                                
 Canon Inc <7751.T> fell 1.8 percent to 4,910 yen and Sony
Corp <6758.T> was down 2.4 percent at 5,190 yen.
                                
 Shippers, which rose earlier this week, slid on
profit-taking. NYK Line <9101.T> shed 4 percent to 994 yen and
Mitsui OSK Lines <9104.T> was down 3.3 percent at 1,415 yen.
                                
 Trade slowed on the Tokyo exchange's first section, with 890
million shares changing hands compared with last week's morning
average of 961 million.
                                
 Declining stocks outnumbered advancing ones by a ratio of
three to one.
                                
 (Reporting by Elaine Lies; Editing by Eric Burroughs)