Japan stocks fall 2.5 pct, hit by yen, US worry

(Updates to midsession)

TOKYO, Feb 29 (Reuters) - Japanese stocks fell over 2.5 percent on Friday to their lowest level in a week, with Honda Motor (7267.T) and other exporters battered as the dollar marked a three-year low against the yen.

Growing worries about the U.S. economy weighed on stocks after Federal Reserve Chairman Ben Bernanke warned about the health of small U.S. banks, hurting financial shares such as Mizuho Financial Group (8411.T). The benchmark Nikkei average .N225 was down 2.5 percent by midsession, shedding 354.19 points to 13,571.32. The broader TOPIX was down 2.5 percent at 1,319.02. (Reporting by Elaine Lies)