Nikkei hits 6-week low on yen, machinery stocks slide

By Aiko Hayashi

TOKYO (Reuters) - Japan's Nikkei average hit its lowest point in six weeks on Wednesday, hurt as the yen strengthened on talk of more stimulus for the U.S. economy, and by an unexpected slide in domestic machinery orders.

Komatsu (6301.T) and other machinery makers dropped after Japan's core private-sector machinery orders fell 3.0 percent in May from the previous month, suggesting a recovery in capital spending may be delayed.

"Uncertainty about U.S. consumer spending and the outlook for corporate earnings is spurring yen strength and that's hitting shares of exporters here," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.

The benchmark Nikkei .N225 lost 1.8 percent or 175.87 points at 9,471.92 by the midday break, with trade picking up a bit from last week's average and looks poised to put in its sixth straight day of losses.

At one point, it fell as low as 9,454.90, its lowest level since May 29. In the five days to Tuesday, it shed 3.1 percent.

The broader Topix fell 1.9 percent to 892.32.

An adviser to President Barack Obama said on Tuesday the United States should be planning for a possible second round of fiscal stimulus to further prop up the economy after the $787 billion rescue package launched in February.

That heightened fears that an economic recovery will be slow and that the corporate earnings season starting this week will be weak, sending the Dow Jones industrial average .DJI to its lowest close since April 28.

The yen hit its highest levels in more than a month against the dollar and the euro on Wednesday, with the dollar was down 0.3 percent at 94.59 yen. Investors fret over a stronger yen as it eats into exporters' profits when they are repatriated.

"Calls for more stimulus steps are emerging in the U.S. as the ones it has already launched haven't led to an improvement in consumption," said Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities.

"But there's still a possibility that those economic steps which were quite large will gradually start to have an impact. Talk like this is also a sign that the government is determined not to let the economy deteriorate further."

Some remained cautious, however.

"The jobs situation is still deteriorating and that's capping a recovery in consumption," said Takahiko Murai, general manager of equities at Nozomi Securities.

"Another round of stimulus measures may be necessary in not only in the U.S. but in Japan."

Market analysts have said investors had a reality check after data on Thursday showed U.S. employers had shed nearly half a million jobs in June with the unemployment rate jumping to 9.5 percent, the highest in nearly 26 years.