Nikkei down 2.2 percent as exporters hit by yen

A man is reflected on an electronic board showing the graphs of Japan's Nikkei share average (yellow), Nasdaq Composite Index (blue) and Dow Jones Industrial Average in Tokyo May 21, 2008.

TOKYO (Reuters) - Japan's Nikkei share average fell 2.2 percent on Thursday, led lower by exporters such as Honda Motor Co (7267.T) on a firmer yen and worries about a weak U.S. economy, a key destination for world exports.

Toyota Motor Corp (7203.T) slid after the automaker said it was cutting U.S. production of its full-size pickup trucks further this year as record gasoline prices have depressed sales of gas-hungry trucks and SUVs.

Bank shares including top lender Mitsubishi UFJ Financial Group (8306.T) took a beating after their U.S. counterparts were hit by worries the credit crisis was tightening its grip on commercial banks.

A broad sell-off in the Tokyo market came after the Dow Jones industrial average .DJI had its lowest close in three months as concerns about the economy compounded credit sector worries and drove banks, autos and transport companies sharply lower. .N

"Japanese stocks alone cannot keep rising when the U.S. market fell to the lowest since March," said Norio Shimura, deputy head of the equities department at Chuo Securities.

He said the Tokyo market's rebound since March had been relatively strong because Japanese shares had previously fallen further.

Since this year's low on March 17, the Nikkei average has gained 23 percent to the recent closing high of 14,489.44 on June 6. Over the same period, the Dow industrial gained a meager 2 percent.

"The Tokyo market's gain has mainly been due to those buying back battered shares," Shimura said.

The benchmark Nikkei .N225 ended down 322.65 points at 14,130.17. The broader Topix .TOPX lost 2.4 percent to 1,375.60.

"It's hard to expect the market to go up further until investors find new trading factors," said Naoki Fujiwara, fund manager at Shinkin Asset Management.

"(A possible) upward revision in corporate earnings projections will not come soon," he added.

A majority of Japanese companies began their business year in April, and any revision to outlooks is not likely to come until after the second quarter.

EXPORTERS, BANKS DOWN

The dollar edged down 0.2 percent to 107.65 yen, pulling further away from a four-month high of 108.59 yen struck earlier this week.

A stronger yen curbs exporters' overseas profits when they are brought back home.

Exporter Honda skidded 3.4 percent to 3,700 yen, becoming the biggest drag on the Nikkei. Toyota Motor Corp (7203.T) lost 3.2 percent to 5,490 yen.

Mitsubishi UFJ dropped 3.6 percent to 1,038 yen. Second-ranked Mizuho Financial Group (8411.T) declined 3.7 percent to 549,000 yen.

Adding to the already bleak outlook for bank stocks, Fifth Third Bancorp (FITB.O) said on Wednesday the Midwestern bank would cut its dividend and raise $2 billion in capital.

Among few standouts was Sanyo Electric 6764.T, which rose 3.3 percent to 280 yen after saying on Thursday that it plans to double annual production of rechargeable batteries to 50 million as more consumers choose the economical and environmentally friendly alternatives.

Trade was moderate on the Tokyo exchange's first section, with 2.1 billion shares changing hands, compared with last week's daily average of 2.3 billion.

(Editing by Brent Kininmont)