* Nikkei falls 0.9 pct; Topix eases 1.1 pct
* Shippers worst sectoral performer, down 3.1 pct
* Olympus gains on reported tie-up with Sony
By Dominic Lau
TOKYO, Sept 28 Japan's Nikkei average hit a
two-week closing low on Friday as concerns about falling
revenues for Japanese companies in China outweighed optimism
over Spain's new economic reform plans and a tough budget
focused on spending cuts.
A territorial spat between Asia's two biggest economies has
led to rising anti-Japanese sentiment in China, which has forced
some Japanese firms to halt production there, adding to concern
of a sharp slowdown in China.
Data showed on Friday that sagging sales in China, Japan's
biggest export market, and the confidence-sapping euro zone
crisis hurt Japan's August industrial output, which fell to a
15-month low and fuelled concerns that the country could slip
into recession later this year.
The Nikkei ended down 0.9 percent at 8,870.16, with
losses widening in the afternoon as traders said stop-loss
selling had been triggered after Nikkei futures broke below
The Nikkei China 50 index, made up of Japanese firms
with heavy exposure to the world's second-largest economy, shed
"If diplomatic relations get any worse it will hit financial
markets on both sides, but Japanese stocks will suffer a heavier
blow," said Mitsushige Akino, chief fund manager at Ichiyoshi
Shippers shed 3.1 percent as the worst sectoral
performer after Bank of America Merrill Lynch downgraded its
ratings on Nippon Yusen KK, Mitsui O.S.K. Lines
and Kawasaki Kisen Kaisha to 'underperform'
from 'neutral' as it lowered its assumption for dry bulk
shipping rates. The three lost between 2 and 3.5 percent.
The benchmark Nikkei lost 1.5 percent in July-September, its
second straight quarterly loss after suffering a 10.7 percent
drop in the April-June period.
The Nikkei is still up 4.9 percent this year. But its
year-to-date performance lags a 15.1 percent rise in the U.S.
S&P 500 and an 11.1 percent gain in the pan-European
STOXX Europe 600 index.
"The flow remains dreadful. Investors are still sitting on
the sidelines. Every few people want to commit to anything. It's
just a very stop-start, stop-start market," said a Tokyo-based
analyst who declined to be identified.
He said policymakers were out of options as shown with the
U.S. Federal Reserve launching another round of bond-buying and
the European Central Bank planning to buy bonds from
highly-indebted countries to help bring down their borrowing
"These are not solutions. The market is looking for
sustainable growth. Europe is still in a parlous state. It is
just kicking the can down the road," the analyst said.
Spain announced a crisis budget for 2013 based mostly on
spending cuts on Thursday in what many see as an effort to
pre-empt the likely conditions of an international bailout.
Although trailing in their year-to-date performance,
Japanese equities are more expensive than their European peers.
They carry a 12-month forward price-to-earnings ratio of 11.6,
versus STOXX Europe 600's 11.1 and the S&P 500's 13.1, according
to Thomson Reuters Datastream.
The broader Topix index dropped 1.1 percent to
737.42 on Friday, with 1.76 billion shares changing hands, up
f r om Thursday's 1.63 billion but down from last week's average
of 1.85 billion.
Pioneer Corp sank 6.4 percent after the Nikkei
newspaper said the audio equipment maker was to book a 6 billion
yen ($77 million) loss on holdings in capital alliance partner
Sharp Corp, which is struggling after it suffered heavy
loss on its TV business.
Gree Inc rebounded 3.4 percent after sliding 12.3
percent on Thursday on a report that mobile phone operator NTT
DoCoMo Inc planned to launch a competing social gaming
network for mobile devices in November.
Other gainers included Olympus Corp, up 1.7
percent. The Nikkei said Olympus would begin developing surgical
endoscopes with Sony Corp, which will become Olympus's
top shareholder with a stake of 11 percent via a 50 billion yen
private placement of shares.
Sony fell 1.1 percent.