Nikkei sinks to 26-month low, Mizuho falls

(Updates to midsession)

TOKYO Jan 16 (Reuters) - Japan's Nikkei average fell to a 26-month low on Wednesday, with Mizuho Financial Group (8411.T) among shares hit hardest after its investment in Merrill Lynch MER.N.

Exporters such as Honda Motor Co Ltd (7267.T) and Sony Corp (6758.T) led a broad sell-off after the dollar fell to a 2-1/2-year low below 106.60 yen JPY= early in the morning.

Still, the market pared some of its losses in the minutes before the end of the morning session, with the benchmark Nikkei .N225 ending the morning down 0.9 percent at 13,841.93 after falling as low as 13,594.32, its lowest since Oct. 31, 2005.

The broader TOPIX index .TOPX was down 1.3 percent at 1,333.03. The TOPIX fell more than 3 percent at one point. (Reporting by Taiga Uranaka)