Nikkei falls 11% in 2007, first down year in 5 yrs

(Adds comments and stocks)

By Aiko Hayashi

TOKYO, Dec 28 (Reuters) - The Nikkei share average fell 11 percent this year, its first annual decline in five years, making it the world's worst-performing major stock market, as Tokyo shares were overshadowed by booming markets and vibrant economies elsewhere in Asia.

Exporters such as Canon Inc (7751.T) were among the top drags on the market's last trading day of 2007 on Friday, with investors put off by a firmer yen and worries about lingering subprime problems and the U.S. economic health.

"The market ended the year as if to symbolise this year's trade -- subprime," said Hitoshi Yamamoto, chief executive officer at Fortis Asset Management Japan.

"This looks like a warning from the market that the subprime problems will continue into the new year and they won't be solved easily."

Yamamoto said Japanese stocks also fell out of favour this year because foreign investors were disappointed by Japanese companies' mindset such as their willingness to adopt anti-takeover measures and the government's slow structural reforms.

The benchmark Nikkei average .N225 finished Friday's half-day session down 1.7 percent or 256.91 points at 15,307.78. The Nikkei gained 6.9 percent in 2006 and 40 percent in 2005.

The broader TOPIX index ended the day down 1.6 percent or 24.26 points at 1,475.68, booking a decline of 12.2 percent for the year -- also the first annual drop in five years.

The Tokyo market will be closed for the New Year holiday until Friday, Jan. 4, when it will open for a half-day of trade. Full-day trade resumes on Jan. 7.

Banks shares were among the most harshly punished stocks in 2007 in light of credit crunch stemming from the subprime problem.

Japan's top bank Mitsubishi UFJ Financial Group (8306.T) lost nearly 30 percent during the year, but trading houses such as Mitsui Co Ltd (8031.T) and shipping firms fared better helped by robust demand from emerging economies.

Shares of Mitsui rose 33 percent this year. (Editing by Mike Miller)