Nikkei down 2.5 pct, shares dumped on economy woes

*Nikkei slides 3 percent, though later pares losses

*Nikkei touches 5-month intraday low as economy worries grow

*Nervousness about U.S. jobs data also sparking selling

*Sony hit on recall of 438,000 Vaio computers (Adds stocks, details)

By Elaine Lies

TOKYO, Sept 5 (Reuters) - Japan's Nikkei stock average shed 2.5 percent on Friday, and fell as much as 3 percent at one stage, as investors dumped a wide range of shares on growing gloom about the global economy. Mizuho Financial Group (8411.T) and other banks led the market lower, while Sony Corp (6758.T) slid 4 percent and touched its lowest level in nearly three years after a recall of its Vaio laptops.

Notable losses were also posted by Sumco Corp (3436.T), which fell 10.4 percent after a brokerage downgrade, and Resona Holdings Inc (8308.T), which sank 8.2 percent.

"Wall Street fell sharply on fears about upcoming U.S. jobs data and the increasingly gloomy outlook for the world economy, especially in Europe," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

"Investors are dumping risky assets and fleeing to quality."

Exporters took a hit as the yen soared to a 13-month high against the euro EURJPY=R. The dollar was clawing higher against the yen but still around 107 yen JPY=.

The benchmark Nikkei .N225 shed 319.05 points to 12,238.61, although it had earlier dipped as low as 12,163.33, its lowest since March 19. The broader Topix was down 2.5 percent to 1,171.11 after also falling 3 percent earlier.

Market players said that further falls were possible given the worsening economic climate around the world. The Nikkei hit this year's low of 11,691 set on March 17.

"In March, the biggest worry was the U.S. economy, and that was mainly centred on the subprime crisis and financial companies," said Masayoshi Okamoto, head of dealing at Jujiya Securities.

"But now problems have spread to more sectors in the United States, and the situation in Europe isn't good. It's probably time for people to start lightening their portfolios, getting rid of shares with lots of European exposure."

Okamoto said that if the dollar manages to hold above 106.50 yen the Nikkei may manage to find some support, but that falls below that level could cause selling to speed up.

SONY SLIDE

Sony's shares slid 4.2 percent to 3,880 yen, its lowest level though since late 2005, hit by the downturn in investor sentiment and after it said it would recall 438,000 Vaio portable computers due to possible overheating that could burn users. [ID:nT150492] Banks were among the big losers, with Mizuho tumbling 6.8 percent to 411,000 yen and taking its week's losses to 13 percent.

Top lender Mitsubishi UFJ Financial Group (8306.T) lost 4.9 percent to 754 yen and Sumitomo Mitsui Financial Group (8316.T) was down 4.2 percent to 588,000 yen. Resona fell to 932,000 yen.

"Results for U.S. banks are only a few weeks away, and there may be some selling going on in fear that there may be some downward revisions," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.

Sumco Corp fell after Mitsubishi UFJ Securities cut its rating to "4" from "3" saying the maker of silicon wafers used for semiconductors is likely to suffer a sharp profit decline next business year due to heavy depreciation costs.

Trade picked up, with 1.05 billion shares changing hands, compared with last week's daily average of 676 million.

Declining shares beat advancing ones by nine to one. (Reporting by Elaine Lies; Editing by Edwina Gibbs)