Nikkei down 0.8% as banks, earnings worries weigh

(Updates to midmorning)

TOKYO, July 11 (Reuters) - The Nikkei stock average fell 0.8 percent on Friday, with bank shares hurt by persistent credit fears, while investors grew increasingly worried about earnings prospects amid high oil prices and slowing consumption.

J. Front Retailing Co. (3086.T) slumped nearly 9 percent after the retailer said its operating profit in the March-May quarter fell 14.0 percent. It issued a profit warning for the fiscal year to February 2009 as consumers are spending less on clothing because of rising food and fuel prices.

Unless the government intervenes, credit fears will persist and financial institutions will keep reporting quarterly losses, said Takahiko Murai, general manager of equities at Nozomi Securities.

"The market is also factoring in the notion right now that corporate earnings forecasts for this year will probably have to be lowered because of high raw materials costs, stemming from high oil prices, and slumping consumption," he said.

As of 0054 GMT, the benchmark Nikkei .N225 had shed 104.62 points to 12,962.59.

The broader Topix declined 0.9 percent to 1,279.80.

U.S. stocks broadly rose on Thursday after U.S. Federal Reserve chairman Ben Bernanke said the central bank and the government are focused on stabilising the financial system.

But financial stocks suffered again on concerns the sector may need additional capital to withstand the ongoing credit crisis. Shares of the top two U.S. mortgage finance companies Freddie Mac (FRE.N) and Fannie Mae (FNM.N) were the hardest hit by those fears.

Mitsubishi UFJ Financial Group (8306.T), Japan's biggest bank, lost 2.4 percent to 964 yen and No.2 Mizuho Financial Group (8411.T) declined 1.3 percent to 519,000 yen.

J. Front Retailing Co. (3086.T) dropped 8.8 percent to 526 yen.

Oil and gas field developer Inpex Holdings gained 2.5 percent to 1.23 million yen after oil surged past $141 a barrel on Thursday amid threats to production in Nigeria and Brazil and an additional missile test by Iran that escalated tensions with the West. (Reporting by Aiko Hayashi; editing by Sophie Hardach)