Nikkei hits 5-½ yr low, recession fear, yen bite
*Nikkei falls 5.5 pct, hits 5-½ year low at one stage
*Firm yen, recession fears drag down exporters
*NEC tumbles after cutting profit forecast (Adds comment, stocks)
By Aiko Hayashi
TOKYO, Oct 23 (Reuters) - The Nikkei average fell 5.5 percent on Thursday and hit its lowest point in more than five years, with exporters such as Canon Inc (7751.T) battered by a firmer yen and fears over the health of the global economy.
NEC Corp's (6701.T) shares tumbled nearly 12 percent after the Japanese electronics maker cut its annual operating profit forecast by 29 percent, hit by sluggish mobile phone sales and rapidly deteriorating demand for microchips. [ID:nT366324]
"We now have a situation where investors can't avoid admitting the spread of the global recession," said Kenichi Hirano, operating officer at Tachibana Securities.
"A strong yen is also a huge blow to Japanese exporters as it will certainly hurt their earnings."
The Nikkei was down 478.95 points to end the morning session at 8,195.74. At one stage, it slid as much as 7.6 percent to 8,016.61, its lowest point since May 2003.
The broader Topix declined 4.8 percent to 846.32.
Figures released on Thursday showed that Japan's exports grew only slightly in September from a year earlier as the spreading effects of the global financial crisis take their toll on demand for Japanese goods. [ID:nT287354]
"The global slowdown has had a clear impact on Japan's exports, and this was even before the financial crisis erupted in September," said Tatsushi Shikano, a senior economist at Mitsubishi UFJ Securities.
"As the financial crisis takes its toll on the real economy not only in the United States but also in Europe and Asia, export volumes will continue to fall in October-December and January-March."
Still, market analysts said short-covering after recent sharp losses prevented a free-fall in the market. So far, the benchmark Nikkei has lost more than 10 percent since Tuesday.
"The market has not fully factored in a potential drop in corporate earnings in the second half as the outlook for the economy rapidly deteriorated after Lehman Brothers went under in September," said Yukio Takahashi, a market analyst at Shinko Securities.
"This week and next week will see the peak of earnings season in Japan and how that will play out is very important to the market."
EXPORTERS BATTERED
The euro slid as low as 124.15 yen EURJPY=R, its lowest since January 2003, as concerns about the worsening global economy prompted investors to dump risky assets. The dollar was down 0.3 percent at 97.40 yen JPY=.
Investors fret over a stronger yen as it curbs exporters' overseas profits when they are brought home.
Canon dropped 7.7 percent to 3,000 yen and Sony Corp (6758.T) lost 8 percent to 2,255 yen, while Honda Motor Co (7267.T) skidded 8.2 percent to 2,075 yen and Toyota Motor Corp (7203.T) fell 5.7 percent to 3,330 yen.
Shares of NEC lost 11.8 percent to 291 yen.
Mazda Motor Corp (7261.T) plunged 15.4 percent to 209 yen after the Asahi newspaper reported that the automaker is planning to buy back half of its own shares to be sold by Ford Motor Co (F.N).
Cash-strapped Ford, which has a 33.4 percent stake in the Japanese automaker, will likely to sell about 20 percent, the paper said. Mazda wants to buy half, and some 10 firms will buy the other half, it said. [ID:nT24422]
A rare bright spot was KDDI Corp (9433.T) after the Japanese phone operator reported a 27 percent gain in quarterly profit on lower handset subsidies and kept its full-year forecast, underscoring its relatively stable earnings profile amid tough economic times. [ID:nT339901]
Shares of KDDI jumped 5.1 percent to 552,000 yen to become the top positive contributor to the Nikkei 225.
Trade picked up on the Tokyo exchange's first section, with 1.23 billion shares changing hands, compared with last week's morning average of 1.11 billion.
Declining stocks outpaced advancing ones by more than 18 to 1. (Additional reporting by the Tokyo newsroom; Editing by Michael Watson)
