(Adds stocks and comments)
By Taiga Uranaka
TOKYO, June 27 (Reuters) - Japan's Nikkei stock average was
down 2.2 percent on Friday after earlier hitting a two-month low
as blue-chip exporters such as Honda Motor Co <7267.T> fell on a
stronger yen, record oil prices and steep losses on Wall Street.
Financial shares also slid, with top lender Mitsubishi UFJ
Financial Group <8306.T> down 3 percent, after Goldman Sachs
forecast more write-downs at Citigroup <C.N> and Merrill Lynch
<MER.N>.
A broad sell-off in the Tokyo market, which extended its
losses to a seventh day, came after the Dow industrial average
<> plunged to a 21-month low.
"It can't be helped. There are only negative factors --
higher oil prices, the credit crunch and a stronger yen," said
Katsuhiko Kodama, a senior strategist at Toyo Securities.
Toyota Motor Corp <7203.T> and other automakers fell after
General Motors' <GM.N> shares sank to their lowest in 53 years.
Goldman warned that the big U.S. automaker might have to
raise capital and cut dividends in a brutal slowdown for the auto
industry.
"Some may think the struggles of U.S. rivals could help
Japanese automakers, but with the yen and oil situation, Japanese
firms will be also negatively affected, especially Toyota, given
its lineup of upscale models," Toyo's Kodama said.
Toyota fell 2.3 percent to 5,050 yen, and Honda lost 3.5
percent to 3,620 yen.
The benchmark Nikkei <> ended the morning down 307.20
points at 13,515.12, after slipping as far as 13,481.78, its
lowest since late April. The broader Topix index <> lost 2
percent to 1,317.48.
Mitsubishi UFJ fell to 936 yen, and Japan's biggest brokerage
Nomura Holdings Inc <8604.T> lost 2.6 percent to 1,583 yen.
JAPAN BOOST OVER?
Japanese stocks have outperformed most major markets in the
past quarter, driven up by foreign investors, who have been net
buyers every week since the first week of April.
But market participants said it may be over, due to mounting
concerns about an economic slowdown in the United States and
Japan.
"The market's falling trend has started. The biggest worry is
U.S. stagflation, and Japan is not good either, with the tankan
expected to be very bad," said Hiroyuki Nakai, chief strategist
at Tokai Tokyo Research Center.
The Bank of Japan's tankan survey for June, due out next
week, is expected to show a sharp fall in sentiment at Japanese
companies as soaring energy and raw material costs bite into
profits.
Darkening economic prospects have prompted investors to flock
to defensive stocks, which are considered less vulnerable to
economic downturns.
Tokyo Electric Power Co <9501.T> jumped 3.4 percent to 2,625
yen after it said it would revise its utility billing scheme for
the first time in two years, which could lead to a rise in
utility bills from January next year. []
Kansai Electric Power Co <9503.T> gained 1.1 percent to 2,380
yen and Chubu Electric Power Co <9502.T> edged up 0.2 percent to
2,515 yen.
"We are seeing strong flow into defensive stocks recently,"
said Hiroaki Osakabe, fund manager at Chibagin Asset Management.
Also among standouts in the day's market was oil and gas
field developer Inpex Holdings Inc <1605.T>, which rose 1.5
percent to 1.32 million yen.
Trade was moderate, with 910 million shares changing hands,
compared with last week's morning average of 919 million.
Declining shares beat advancers by nine to one.
(Editing by Brent Kininmont)
