Japan Nikkei falls 5 pct on yen, oil, Wall Street

(Adds stocks, details)

By Elaine Lies

TOKYO, Jan 4 (Reuters) - Japan's Nikkei tumbled 5 percent on Friday, its first trading day of the year, with the broader TOPIX index battered to its lowest close since Oct 2005 by a stronger yen, higher oil prices and worries about the U.S. economy. The benchmark Nikkei .N225 closed down 4.03 percent after a frenetic half-day session, its lowest close since July 2006, marking its greatest one-day percentage fall since Aug. 27, 2007.

The broader TOPIX closed down by 4.3 percent at 1,411.91, shedding 63.77 points.

Exporters were battered, with companies such as Sony Corp (6758.T) hit especially hard. Many such firms, including Toyota Motor Corp (7203.T), have assumed a currency rate of around 110 yen per dollar.

The Nikkei's drop vastly outpaced falls in other Asian stock markets and even outstripped the 2.3 percent loss marked by the Dow Jones industrial average .DJI from Dec 28 to Thursday, during which Tokyo markets were closed for the New Year's holiday.

"What we're seeing here is a double punch from growing fears about the U.S. economy and the stronger yen," said Yutaka Miura, a senior technical analyst at Shinko Securities.

"High-tech shares have also been hit by falls of semiconductor shares overseas, especially Intel." Intel Corp (INTC.O), the world's largest chip maker, shed 2.7 percent during Thursday U.S. trade, bringing its decline for the first two trading days of 2008 to nearly 8 percent after Bank of America downgraded several microchip makers on Wednesday.

U.S. crude oil prices hit $100.00 per barrel for the first time ever on Jan 2 and $100.09 on Jan 3.

The dollar was trading at just under 109 yen in Tokyo by midday JPY=. It hit a five-week low of 108.25 yen on electronic trading platform EBS on Thursday.

"The market was struggling to deal with all of the changes since it closed for the year on Dec 28, but there were simply too many factors for it to absorb in today's short session," said Masayoshi Okamoto, head of dealing at Jujiya Securities.

Market participants were divided on where the fall might halt, but Japanese Financial Services Minister Yoshimi Watanabe said on Friday that Japanese stocks are relatively cheap with a price-to-earnings ratio of about 15.

Some market participants agreed, saying that prices were already more than low enough to pique investor interest, but others remained sceptical.

TOO MUCH UNCERTAINTY

"There's so much uncertainty now about the U.S. economy, the dollar/yen rate, and crude oil prices that it's pretty hard to see how anybody could buy," Miura at Shinko Securities said.

"Until these things settle down, investors are going to remain leery of buying."

The Nikkei ended 2007 at 15,307.78, a loss for the year of 11 percent, its first fall in five years, making Tokyo the world's worst-performing major stock market. The surging yen battered exporters. A stronger yen makes Japanese products more expensive in overseas markets and cuts into profits brought back to Japan.

Nissan Motor Co (7201.T) slid 9.2 percent to 1,117 yen, with Mazda Motor Co (7261.T) close behind with a loss of 7.7 percent at 515 yen.

Sony slid 6.6 percent to 5,790 yen and Canon Inc (7751.T) by 5 percent to 4,940 yen. Hitachi (6501.T) was down 4.7 percent to 794 yen.

The drop in Intel hit high tech firms. Tokyo Electron (8035.T) fell 7.1 percent to 6,370, becoming one of the biggest drags on the Nikkei 225, while Advantest Corp (6875.T) fell 6.76 percent to 2,965 yen.

Not even oil-related firms escaped unscathed, with Nippon Oil Corp (5001.T) fell 7.6 percent to 840 yen.

But oil developer INPEX Holdings (1605.T) did manage to eke out a rise of 0.83 percent to 1.2 million yen to become one of the day's few gainers.

Trade was active, with 1.4 billion shares changing hands in the half-day session, nearly twice the last week's morning average of 724 million shares.

Declining shares beat advancers by nearly 39 to one. (Reporting by Elaine Lies)