Nikkei falls 0.6 pct, banks continue to suffer
*Nikkei down, banks fall further on financial sector worries
*Toyota falls to nearly three-year low on target cut report
*Energy shares hit by sharp drop in oil prices (Adds stocks and comments)
TOKYO, July 16 (Reuters) - Japan's Nikkei share average fell 0.6 percent on Wednesday, with bank shares extending the previous day's sharp losses amid deepening worries about the financial sector.
Toyota Motor Corp (7203.T) fell to a nearly three-year low on a report that the automaker would cut its global sales target for this year due to a slowdown in U.S. sales. [ID:nT219037]
A stronger yen added to exporters' woes, with video game maker Nintendo Co Ltd (7974.OS) losing more than 4 percent.
Japan's top three banks, which lost more than 5 percent on Tuesday, continued to suffer, with No. 1 lender Mitsubishi UFJ Financial Group (8306.T) falling nearly 2 percent.
"I think Japanese banks are better positioned (than U.S. and European rivals). Their exposure to Fannie Mae and Freddie Mac debt securities should not be a cause of much concern, unlike equities," said Naoki Fujiwara, fund manager at Shinkin Asset Management.
"But investors are waiting to see U.S. bank earnings this week," he said, referring to earnings by Merrill Lynch MER.N and other financial institutions.
Mitsubishi UFJ fell 1.9 percent to 908 yen, but No. 2 Mizuho Financial Group (8411.T) and No. 3 Sumitomo Mitsui Financial Group (8316.T) ended the morning off the day's lows, with Mizuho down 0.4 percent and Sumitomo Mitusi down 0.1 percent.
The benchmark Nikkei .N225 ended the morning down 73.39 points at 12,681.17. The broader Topix lost 0.9 percent to 1,241.93.
The dollar's drop against the yen, though off a six-week low of 104.16 yen hit on Tuesday, hurt exporters.
Nintendo, maker of popular Wii video game console, fell 4 percent to 56,000 yen.
TOYOTA FALLS
Toyota fell 1.3 percent to 4,620 yen, hitting the lowest intraday price since September 2005.
Japanese national broadcaster NHK said the automaker would cut its global sales target for calendar 2008 by 3.6 percent to 9.5 million vehicles to reflect a sharp slowdown in the United States.
The world's biggest automaker had said it would announce revised sales figures for the tough U.S. market some time this month. A source with knowledge of the situation said Toyota would lower its worldwide sales target along with that. [ID:nT57190]
Shinkin Asset's Fujiwara said Toyota's share prices have already priced in a slowdown in demand. He added that the stock was now attractive with a dividend yield of 3 percent, roughly double the benchmark government bond.
"This is a good chance to buy Toyota. The automaker is now laying foundations for future growth," he said.
Energy shares fell after U.S. crude oil futures CLc1 ended more than 4 percent lower on Tuesday.
Oil and gas field developer Inpex Holdings Inc (1605.T) fell 4.8 percent to 1.18 million yen. Trading houses Mitsubishi Corp (8058.T) dropped 3.1 percent to 3,170 yen and Mitsui & Co (8031.T) lost 3.5 percent to 2,050 yen.
Volume was thin, with 897 million shares changing hands compared to last week's morning average of 926 million.
Decliners outnumbered advancers by nearly 3 to 1.
(Editing by Sophie Hardach)
