Nikkei down 1.5 pct on U.S. worry, firmer yen

(Updates to midmorning)

TOKYO, June 19 (Reuters) - Japan's Nikkei share average shed 1.5 percent on Thursday, led lower by exporters such as Canon Inc (7751.T) on a firmer yen and worries about a weak U.S. economy, a major destination for world exports.

Bank shares including top lender Mitsubishi UFJ Financial Group (8306.T) took a beating after fears that the credit crisis was tightening its grip on commercial banks hit their U.S. counterparts.

"It seems the United States wants to curb inflation even if it risks slowing down the economy," said Takahiko Murai, general manager of equities at Nozomi Securities.

"Exports support Japan's economy and there's no way Japan won't be affected. Shanghai and Vietnamese stocks are already eroding."

As of 0040 GMT, the benchmark Nikkei .N225 was down 223.18 points at 14,229.64.

The broader Topix slipped 1.6 percent to 1,387.24.

U.S. stocks fell on Wednesday as worries about a weak economy compounded credit sector concerns and drove shares of banks, autos and transport companies sharply lower. [.N]

The dollar edged down 0.2 percent to 107.65 yen JPY=, pulling further away from a four-month high of 108.59 yen struck earlier this week.

A stronger yen curbs exporters overseas' profits when they are brought back home.

Canon fell 1.4 percent to 5,480 yen and Sony Corp (6758.T) declined 2.2 percent to 5,240 yen.

Toyota Motor Corp (7203.T) lost 2.3 percent to 5,540 yen after the automaker said it was cutting U.S. production of its full-size pickup trucks further this year as record gasoline prices have depressed sales of gas-hungry trucks and SUVs. [ID:nN18282534]

Japanese bank shares fell, with top lender Mitsubishi UFJ Financial Group (8306.T) dropping 3 percent to 1,045 yen.

Fifth Third Bancorp (FITB.O) said on Wednesday the Midwestern bank would cut its dividend and raise $2 billion in capital, stirring fears that the credit crisis was tightening its grip on commercial banks. (Reporting by Aiko Hayashi; Editing by Michael Watson)