* Nikkei pares losses after WSJ report on Citi
* Non-bank shares tumble after SFCG bankruptcy filing
* Worries about slumping demand weigh on exporters
(Adds stocks, details)
By Aiko Hayashi
TOKYO, Feb 23 (Reuters) - Japan's Nikkei stock average
slipped 0.2 percent on Monday, though it trimmed losses on a
media report the U.S. government may end up with as much as 40
percent of Citigroup's <C.N> common stock.
Citigroup executives are hoping the talks with U.S. federal
officials will result in a stake closer to 25 percent, the Wall
Street Journal reported. []
Consumer finance firms such as Takefuji Corp <8564.T>
tumbled after SFCG <8597.T>, a high-interest lender to smaller
companies, failed on Monday as tightening credit hits businesses
throughout the Japanese economy. []
Slumping global demand also hurt exporters such as Sony Corp
<6758.T>.
"Media reports about Citi sparked short covering in U.S.
stock futures and that move spread to the domestic market,
coupled with buying from pension funds," said Hiroaki Kuramochi,
chief equity marketing officer at Tokai Tokyo Securities.
"But once the story runs its course, the market could face
selling pressure again because of mounting credit worries in
Japan."
The benchmark Nikkei <> was down 17.54 points at
7,398.84, after falling to as low as 7,209.43. It booked on
Friday its lowest close since Oct. 27.
The broader Topix <>, which posted on Friday its lowest
finish in 25 years, fell 0.3 percent to 737.03.
"It seems like a matter of time before the exporter-heavy
Nikkei 225, which had been supported by the currency, tests last
year's lows -- it could go as early as this week," said Takahiko
Murai, general manager of equities at Nozomi Securities.
"The problem now is that the weaker yen cannot make up for
the loss of sales from exports."
FINANCIALS UNDER PRESSURE
SFCG, a lender to smaller companies, was awash with sell
orders after it filed for bankruptcy protection with 338 billion
yen ($3.6 billion) in debt.
The price was indicated at 1,092 yen, or down 15.5 percent
from Friday's close.
Takefuji tumbled 10.3 percent to 419 yen and Aiful Corp
<8515.T> lost 11.7 percent to 113 yen.
"The bankruptcy filing highlighted a severe reality that
Japanese mid- to small-size companies face," said Kenichi
Hirano, operating officer at Tachibana Securities.
"But for now, the market has avoided sustaining a huge blow
from the news."
Exporters fell, though many recovered some ground as the
overall market pared its earlier losses.
Sony fell 0.9 percent to 1,573 yen and TDK Corp <6762.T>
shed 1.8 percent to 3,320 yen. Honda Motor Co <7267.T> slipped
0.5 percent to 2,235 yen.
Fears that the U.S. government may be forced to nationalise
some big banks pushed the Dow industrials to a 6-1/2-year low on
Friday, also initially pushing Japanese banks stocks lower.
Mizuho Financial Group <8411.T> slid 2.1 percent to 184 yen,
though top lender Mitsubishi UFJ Financial Group <8306.T> swung
to positive territory, gaining 0.7 percent to 432 yen.
Trade was active on the Tokyo exchange's first section, with
1.1 billion shares changing hands, compared to last week's
morning average of 819 million.
Declining stocks outpaced advancing ones by more than 2 to
1.
(Reporting by Aiko Hayashi; Editing by Brent Kininmont)
