Nikkei slips as banks, earnings worries weigh

* Nikkei slips despite rise on Wall Street

* Banks fall on credit fears, before U.S. financials earnings

* J. Front Retailing drops, earnings worries weigh (Adds stocks, details)

By Aiko Hayashi

TOKYO, July 11 (Reuters) - The Nikkei average fell 0.4 percent on Friday, with bank shares hurt by persistent credit fears while investors grew increasingly worried about earnings prospects amid high oil prices and slowing consumption.

J. Front Retailing Co. (3086.T) skidded over 6 percent after the retailer said its operating profit in the March-May quarter fell 14.0 percent. It issued a profit warning for its business year to February 2009, saying consumers are spending less on clothing because of rising food and fuel prices.

Unless the government intervenes, credit fears will persist and financial institutions will keep reporting quarterly losses, said Takahiko Murai, general manager of equities at Nozomi Securities.

"The market is also factoring in the notion right now that corporate earnings forecasts for this year will probably have to be lowered because of high raw materials costs, stemming from high oil prices, and slumping consumption," he said.

The benchmark Nikkei .N225 shed 55.41 points to 13,011.80, while the broader Topix declined 0.6 percent to 1,283.34.

Fujio Ando, senior managing director at Chibagin Asset Management, said bank shares also lost ground after Thursday's gains as investors await earnings results from leading financial firms such as Citigroup Inc (C.N) and Merrill Lynch MER.N next week.

U.S. stocks rose broadly on Thursday after Federal Reserve Chairman Ben Bernanke said the central bank and the government are focused on stabilising the financial system. [.N]

But financial stocks suffered again on concerns the sector may need additional capital to withstand the ongoing credit crisis. Shares of the top two U.S. mortgage finance companies Freddie Mac (FRE.N) and Fannie Mae (FNM.N) were the hardest hit by those fears.

BANKS SLIP

Mitsubishi UFJ Financial Group (8306.T), Japan's biggest bank, lost 1.4 percent to 974 yen, No.2 Mizuho Financial Group (8411.T) declined 1 percent to 521,000 yen and Sumitomo Mitsui Financial Group (8316.T) fell 1.4 percent to 819,000 yen.

Nomura Holdings Inc (8604.T), Japan's biggest brokerage, slipped 1.4 percent to 1,506 yen.

Exporters slid on concerns about a slowdown in global consumer spending.

Canon Inc (7751.T) gave up 2.1 percent to 5,070 yen, the top drag on the Nikkei 225, while Toyota Motor Corp (7203.T) fell 1.8 percent to 4,890 yen.

J. Front Retailing, the operator of the Matsuzakaya and Daimaru department stores, dropped 6.4 percent to 540 yen.

In contrast, Fast Retailing Co Ltd (9983.T) rose 1.4 percent to 10,200 yen after the operator of Uniqlo casual clothing stores said on Thursday its third-quarter operating profit rose 33 percent, as strong sales of seasonal items helped it recover from a slump in the previous business year. [ID:nT22823]

Oil and gas field developer Inpex Holdings Inc (1605.T) gained 2.5 percent to 1.23 million yen after oil surged past $141 a barrel on Thursday amid threats to production in Nigeria and Brazil and an additional missile test by Iran that escalated tensions with the West.

Trade picked up on the Tokyo exchange's first section, partly helped by trades in connection with the settlement of index options, with 1.1 billion shares changing hands, above last week's morning average of 900 million.

Declining stocks outpaced advancing ones by 882 to 661. (Reporting by Aiko Hayashi; Editing by Michael Watson)