Nikkei down over 2 pct as financial worries weigh

*Nikkei sheds over 2 pct, poised for biggest loss in 1 month

*Concern about U.S. banks fan economic fears

*Exporters down as dollar retreats below 109 yen

*Japan GDP data shows contraction, but impact limited (Adds stocks, details)

By Elaine Lies

TOKYO, Aug 13 (Reuters) - Japan's Nikkei average slipped 2.2 percent on Wednesday as renewed worries about U.S. financial firms stoked concern about the global economy, with Canon Inc 7751. and other exporters also hit as the yen gained strength. Mitsubishi UFJ Financial Group (8306.T) and other banks slid, battered by news that JPMorgan Chase (JPM.N) had racked up $1.5 billion of losses so far this quarter on mortgage-linked assets which sent shares in U.S. financials tumbling.

Market players said this had a bigger impact than data showing Japan's economy shrank 0.6 percent in April-June from the previous quarter, in line with market forecasts.

"Certainly a stronger dollar and lower oil prices are a help for the market, but an end to worry about overseas banks would help one hundred times more, one thousand times more," said Masayoshi Okamoto, head of dealing at Okasan Securities.

"How long will this go on? The more time passes, the worse it seems to get."

Corporate profit warnings have also fanned fears about Japan's economy and hit share prices.

Japan's biggest advertising firm, Dentsu Inc (4324.T), sank nearly 7 percent after reporting a sharp drop in quarterly profit and cutting its outlook -- moves that led to a brokerage downgrade.

"It's the economy, both in the U.S. and in Japan," said Takahiko Murai, general manager of equities at Nozomi Securities. "With domestic demand poor and exports sliding, it seems things may grow even worse." The GDP data released just prior to the opening showed an end to three quarters of expansion as Japan's economy shrank on weaker exports and the effect of higher prices on consumption.

The data underscored growing fears that the world's second-largest economy is either slipping into a recession or is already in one.

The benchmark Nikkei shed 297.02 points to 13,006.58, heading for its biggest one-day percentage loss since early July, while the broader Topix lost 2.1 percent to 1,244.96 yen.

EXPORTERS, BANKS

The dollar slipped against the yen, falling to 108.68 by midday JPY=, and this pressured exporters such as Sony Corp (6758.T), which slid 3.2 percent to 4,200 yen.

Canon shed 1.5 percent to 5,260 yen and industrial robot maker Fanuc Ltd (6954.T) fell 1.6 percent to 8,700 yen.

Dentsu fell 6.6 percent to 206,000 yen. In more earnings gloom, Trend Micro Inc (4704.T), plunged 5.7 percent to 3,500 yen, dragging heavily on the Nikkei 225.

The Internet security software firm said its operating profit is likely to fall 15 percent for the July-September quarter, hurt by a stronger yen and marketing expenses.

Mitsubishi UFJ Financial Group fell 4 percent to 843 yen. It also said on Tuesday it would bid $3 billion to buy the remaining 35 percent of California's UnionBanCal Corp UB.N that it does not already own. [ID:nT366224]

No. 3 banks Sumitomo Mitsui Financial Group (8316.T) slipped 3 percent to 692,000 yen and Mizuho Financial Group (8411.T) shed 2.9 percent to 471,000 yen.

Trade dropped slightly, with 954 million shares changing hands on the Tokyo stock exchange's first section compared to last week's morning average of 1 billion.

Advancers outnumbered decliners by 10 to 1. (Reporting by Elaine Lies)