Nikkei slides to 5-mth low, economy worries bite

(Updates to midmorning)

TOKYO, Sept 5 (Reuters) - Japan's Nikkei average slid 2.7 percent to a more than 5-month low on Friday, with Canon Inc (7751.T) and other exporters battered by growing fears for the global economy and the yen's surge. Sony Corp (6758.T) slipped 4 percent after it launched a voluntary recall of 438,000 Vaio portable computers, citing a potential hazard that could cause them to overheat in one of the biggest computer recalls since 2006. [ID:nN04439855]

"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." Market players said that while the Nikkei was still some distance from this year's low of 11,691 set on March 17, further falls were possible given the worsening economic climate around the world.

"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, and the situation in Europe isn't good. It's probably time for people to start lightening their portfolios of shares with lots of European exposure."

The benchmark Nikkei shed 336.51 points to 12,221.35, its lowest since March 19. The broader Topix was down 2.7 percent at 1,169.38.

Selling was so broad that not even one of the sub-indexes of first section shares was in positive territory, but among sectors particularly hard-hit were banks.

Japan's No.2 bank Mizuho Financial Group (8411.T) was down 5.2 percent at 418,000 yen, with No.3 bank Sumitomo Mitsui Financial Group (8316.T) hard on its heels with losses of 4.7 percent to 585,000 yen.

Canon slid 2.5 percent to 4,650 yen and Toyota Motor Corp 2703.T was down 2.5 percent at 4,740 yen. Honda Motor Co 2767.T also skidded 2.5 percent to 3,550 yen. (Reporting by Elaine Lies; Editing by Michael Watson)