Nikkei slips 1.5 pct; TDK drags, financial worries weigh

(Updates to midmorning)

TOKYO, March 27 (Reuters) - Japan's Nikkei average slipped 1.5 percent on Thursday, dragged lower by TDK Corp (6762.T: Quote, Profile, Research, Stock Buzz) after a newspaper reported the company would likely miss its profit forecast due to a stronger yen, while financials fell on worries about the outlook for bank profits.

Exporters such as Honda Motor Co Ltd (7267.T: Quote, Profile, Research, Stock Buzz) lost ground on a firmer yen and concerns about a recession in the United States, a key destination for Asian exports.

On Wednesday a prominent analyst cut earnings forecasts for four big U.S. banks and Deutsche Bank (DBKGn.DE: Quote, Profile, Research, Stock Buzz) issued a profit warning, while European central bankers warned there was no end in sight to the global credit crunch.

"The fall in financial issues isn't stopping, due to more worries about earnings such as subprime-related appraisal losses. We can't really expect to see a fundamental recovery any time soon," said Yusuke Sakai, manager of equities trading at Mizuho Securities.

"The yen now seems to be comfortable around 100 yen against the dollar, and investors are fretting over next year's earnings outlooks for exporters, particularly automakers," he said.

Many auto and tech exporters have assumed a currency rate of 105 yen to the dollar in making profit forecasts for the business year ending this month.

As of 0052 GMT, the benchmark Nikkei average .N225 was down 195.72 points at 12,510.91, after gaining nearly 8 percent in the last six days.

The broader TOPIX shed 1.3 percent or 15.46 points to 1,222.09.