Nikkei falls 5.5 pct on yen advance, economic worry

(Updates to midafternoon)

TOKYO Oct 23 (Reuters) - Japan's Nikkei average slumped 5.5 percent on Thursday after earlier hitting a more than five-year low as the yen's surge underlined growing global economic fears, with Honda Motor Co (7267.T) and other exporters hit hard. Financial stocks were battered, with No. 2 bank Mizuho Financial Group (8411.T) tumbling more than 11 percent after a report that it may delay planned share buybacks to preserve capital in the face of global financial turmoil and sliding profits [ID:nT23771].

The dollar hit a seven-month low against the yen as deepening concerns about the global economy prompted institutional investors to dump risky overseas assets, while the euro hit a six-year low against the Japanese currency JPY= EURJPY=R.

"The stronger yen is really a manifestation of a much bigger issue: the prospect of a deep recession," said Norihiro Fujito, general manager at the investment research and information division of Mitsubishi UFJ Securities.

"A particular worry for Japanese exporters is the prospect that emerging markets, which were growing so strongly, now appear to have reversed into a shrinking trend -- and this will hit the earnings of Japanese companies far into the future, not just for the current financial year but the one beyond."

One sector he cited as especially vulnerable was steelmakers, shortly after a source with direct knowledge of the matter said Nippon Steel Corp (5401.T) was mulling output cuts from November for the first time in three years to cope with falling demand [ID:nT276780>. Data released by Japan's Ministry of Finance on Thursday Japan's exports grew only slightly in September from a year earlier. [ID:nT363647]

The benchmark Nikkei .N225 lost 480.75 points to 8,193.94. The broader Topix .TOPX was down 4.9 percent to 845.74.

Honda fell 9.7 percent to 2,040 yen and Canon Inc (7751.T) dropped 9.4 percent to 2,950 yen.

Mizuho Financial Group shed 11.8 percent to 294,800 yen and Mitsubishi UFJ Financial Group (8306.T) lost 6.9 percent to 721 yen.

Nippon Steel was down 5.8 percent to 295 yen and JFE Holdings (5411.T) slid 5.4 percent to 2,115 yen. (Reporting by Elaine Lies; Editing by Hugh Lawson)