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TOKYO Dec 17 (Reuters) - Japanese stocks fell for the fourth straight session on Monday, tracking falls on Wall Street after fresh data pointed to a surge in U.S. inflation, dispelling chances of further rate cuts by the Federal Reserve.
Financial shares were among the hardest hit, with No.2 bank Mizuho Financial Group Inc (8411.T) down 5 percent on credit concerns.
The market accelerated its falls in the afternoon but participants did not see any particular factor behind it.
Instead, they said selling spurred more selling in a highly volatile session, as volume thinned with many foreign investors winding down trades in the leadup to vacations.
"I don't think fundamentals have deteriorated that much. The market is moved by speculative trades in the absence of buyers," said Akihide Kinugawa, chief fund manager at T&D Asset Management.
Investors also remained cautious ahead of market events.
"There are earnings reports by U.S. investment banks, so it's hard to make a move this week," said Takashi Ushio, head of the investment strategy division at Marusan Securities.
Three of Wall Street's biggest investment banks and brokerage firms will report quarterly earnings this week -- Goldman Sachs (GS.N) on Tuesday, Morgan Stanley (MS.N) on Wednesday and Bear Stearns BSC.N on Thursday.
Exporters including Canon Inc (7751.T) and Honda Motor Co Ltd (7267.T) lost most of the earlier gains made on the firm dollar, helping push down the overall market. Canon edged up 0.4 percent to 5,530 yen and Honda finished down 0.3 percent at 3,690 yen.
Trade was light, with 1.8 billion shares changing hands, compared with last week's average of 2.1 billion. Declining shares beat advancers by nearly 12 to one.
Bank shares were among the hardest hit in a broad sell-off, with the nation's biggest bank Mitsubishi UFJ (8306.T) down 4.3 percent at 1,028 yen. Mizuho slid 5 percent to 533,000 yen and third-ranked Sumitomo Mitsui Financial Group Inc (8316.T) lost 3.7 percent to 825,000 yen.
Nomura Securities said bank shares would suffer further if Mitsubishi UFJ and its Japanese peers agreed to contribute to a U.S. subprime support fund.
Financial industry sources said on Wednesday that Japan's three largest banks had been approached for contributions of $5 billion each to a subprime support fund planned by U.S. banks.
Nomura analyst Keisuke Moriyama wrote in a note to clients that the amount requested from the Japanese banks "would be clearly excessive".
"If the Japanese banks accept the original request without demur, we think that further negative effects on share prices would be unavoidable," he wrote.
Millea Holdings Inc (8766.T) rose as much as 4.5 percent after Japan's top non-life insurance company said it would buy Lloyd's of London insurer Kiln Ltd KIN.L for 442 million pounds in cash to help it expand overseas. [ID:nT139933]
During the afternoon session, it also said it would announce a share buyback after the close, without providing details. The shares ended the session up 1.1 percent at 3,630 yen.
Shares of Towa Real Estate Development Co Ltd 8834.T surged 16 percent to 232 yen after Mitsubishi Estate said on Friday it would raise its stake in Towa Real Estate to a controlling 51.88 percent from 33.4 percent. (Editing by Michael Watson)