UPDATE 1-Japan regulator probes steel firms -source

(Adds details, background)

TOKYO, July 31 (Reuters) - Japan's Fair Trade Commission is investigating four steel makers, including Nippon Steel Corp. (5401.T: Quote, Profile, Research, Stock Buzz) and JFE Holdings (5411.T: Quote, Profile, Research, Stock Buzz), over possible price fixing in construction steel products with a combined market of 100 billion yen ($840 million) a year, a source close to the probe said.

The commission had also raided the offices of Sumitomo Metal Industries (5405.T: Quote, Profile, Research, Stock Buzz) Ltd. and Kubota Corp. (6326.T: Quote, Profile, Research, Stock Buzz) on suspicion of collusion to fix prices and decide which would get orders from construction firms, the source said.

The suspected wrongdoing took place between 2004 and 2005, the source said.

Spokesmen for Nippon Steel and JFE, the world's No.2 and No.4 steelmakers, said officials of the anti-monopoly watchdog were currently at their offices looking into possible violations related to steel sheet pile and steel-pipe pile.

A Sumitomo Metal Industries spokesman said the firm had done nothing wrong.

Media reports of the investigation sent shares of Nippon Steel down 2 percent to close at 900 yen. Shares in JFE Holdings fell 1.7 percent to 8,210 yen.

Shares of Sumitomo Metal Industries fell 2.7 percent to 692 yen while Kubota lost 1.1 percent to 996 yen. The benchmark Nikkei average .N225 closed down 0.23 percent. ($1=118.93 Yen)