Japan's Nikkei hits 17-mth low on Wall St, oil, yen

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By Elaine Lies

TOKYO, Jan 4 (Reuters) - Japan's Nikkei stock average tumbled 4 percent to its lowest close in 17 months on Friday as investors dumped shares across the board on concerns a stronger yen, higher oil prices and a shaky U.S. economy would dent corporate profits.

High-tech shares and auto makers such as Sony Corp (6758.T) were among the hardest hit, with the yen trading near a five-week high on the dollar and a weak set of economic data from the United States sparking jitters over a key market for Japanese exports.

The frenetic half-day session followed a week-long vacation for Japanese financial markets during which the Dow Jones industrial average tumbled more than 2 percent and the price of crude oil topped $100 for the first time, threatening the oil-dependent Japanese economy.

"There's so much uncertainty now about the U.S. economy, the dollar/yen rate, and crude oil prices that it's pretty hard to see how anybody could buy," said Yutaka Miura, a senior technical analyst at Shinko Securities.

The dollar was trading at slightly over 109 yen by midafternoon JPY=. It hit a five-week low of 108.25 yen on electronic trading platform EBS on Thursday.

The Nikkei's drop, which at one point hit 5 percent, vastly outpaced falls in other Asian stock markets and even outstripped the 2.3 percent loss marked by the Dow Jones industrial average .DJI from Dec 28 to Thursday, during which Tokyo markets were closed for the New Year's holiday.

Market participants were divided on where the fall might halt, but Japanese Financial Services Minister Yoshimi Watanabe said on Friday that Japanese stocks are relatively cheap with a price-to-earnings ratio of about 15. Others agreed.

OVERSELLING?

"I have a bit of a sense that the market was oversold, especially in comparison with other Asian markets," said Soichiro Monji, chief strategist at the equity management department of Daiwa SB Investments.

"If you look at the orders placed by foreign brokers ahead of the opening, the scale of their selling was quite small. It seems Japanese investors just back from vacation sold in panic."

Many in the market thought the 14,400 level might well pique investor interest.

The Nikkei .N225 closed down 4.03 percent at 14,691.41 after shedding 616.37 points, its biggest daily percentage loss since Aug. 17, 2007.

The broader TOPIX closed down by 4.3 percent at 1,411.91, shedding 63.77 points for its lowest close since October 2005.

The Nikkei ended 2007 at 15,307.78, a loss for the year of 11 percent, its first fall in five years, making Tokyo the world's worst-performing major stock market. The surging yen battered exporters. A stronger yen makes Japanese products more expensive in overseas markets and cuts into profits brought back to Japan.