Japan stocks slide over 2 pct on yen, recession fears

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By Aiko Hayashi

TOKYO, March 7 (Reuters) - Japan's Nikkei average fell 2.9 percent to a six-week low on Friday as investors sold exporters such as Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz) on a stronger yen and fears of a U.S. recession, while silicon wafer maker Sumco Corp (3436.T: Quote, Profile, Research, Stock Buzz) tumbled after predicting weaker profits.

Banks such as Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz) also took a beating after U.S. mortgage lender Thornburg Mortgage Inc (TMA.N: Quote, Profile, Research, Stock Buzz) said it failed to meet a $28 million margin call, the latest victim of the global credit crisis. [ID:nN06212186].

Investors shifted funds into the perceived safety of Japanese government bonds, with the benchmark 10-year yield <JP10YTN=JBTC> falling as low as 1.325 percent to come in sight of a one-month low of 1.320 percent hit on Monday.

"Credit fears are spreading. Things like that probably won't be over after one or two cases and investors are worried there will be more," said Takahiko Murai, general manager of equities at Nozomi Securities.

"We now have more pessimists in the market in terms of whether the U.S. will tip into a recession or it will be just a temporary slowdown," predicting the Nikkei could fall to the 11,000-12,000 level.

The benchmark Nikkei average .N225 ended the morning session down 378.60 points at 12,836.82, hitting its lowest point since Jan. 23. It fell as much as 3.6 percent at one point. The broader TOPIX index shed 2.6 percent to 1,254.56.

Yumi Nishimura, manager of the investment advisory section at Daiwa Securities SMBC, said investors were unlikely to push the market down much further as they wait for U.S. jobs data out later in the day for further clues on the health of the economy.