Nikkei falls 1.8 pct as TDK drags, firm yen weighs

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By Aiko Hayashi

TOKYO, March 27 (Reuters) - Japan's Nikkei average fell 1.8 percent on Thursday, dragged down 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 against the dollar, while financials fell on worries about the outlook for bank profits.

Exporters such as Toyota Motor Co (7203.T: Quote, Profile, Research, Stock Buzz) lost ground on the firmer yen and concerns about a recession in the United States, a key destination for Asian exports.

On Wednesday a prominent U.S. analyst cut earnings forecasts for four big U.S. banks and Deutsche Bank (DBKGn.DE: Quote, Profile, Research, Stock Buzz) said credit market aftershocks could hit its 2008 profits, while European central bankers warned there was no end in sight to the global credit crunch.

"The fall in financial stocks isn't stopping, due to more worries about earnings issues such as subprime-related appraisal losses. We can't really expect to see a fundamental recovery anytime 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.

The benchmark Nikkei average .N225 was down 225.65 points at 12,480.98, after gaining nearly 8 percent in the last six days.