Nikkei 2008 outlook downgraded, hit by yen surge

By Taiga Uranaka

TOKYO (Reuters) - Japanese share prices are expected to show an overall loss this year as U.S. economic worries, a stronger yen and high raw materials costs hit export-dependent corporate profits, according to a Reuters poll of analysts.

The benchmark Nikkei average .N225 is forecast to end 2008 at 14,000, down 8.5 percent on the year, according to the median forecast of 19 equity analysts and investment managers polled during the period March 10-14.

That is significantly lower than the 17,225 level for the Nikkei that analysts had predicted just three months ago, when many had expected the worst would be over the global market turmoil in the first half of the year.

All 19 predictions were below December's median forecast, with 10 below 15,000 -- the lowest in the previous poll.

The forecasts were taken before JPMorgan Chase bought ailing investment bank Bear Stearns at the weekend and the U.S. Federal Reserve extended lending directly to securities firms for the first time since the Great Depression.

The latest forecast indicates a 17 percent gain from Tuesday's close of 11,964.16 -- which was just above Monday's 2-1/2 year low.

But now few participants have an end in sight for the credit market turmoil stemming from the U.S. subprime loan problems.

Worse, the yen's sharp gains against the dollar has led many to predict the Tokyo market will suffer a further fall when companies give their profit outlooks for the business year starting on April 1.