Nikkei down 2.3 pct, marks worst quarter since 2001

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By Elaine Lies

TOKYO, March 31 (Reuters) - Japan's Nikkei benchmark slid 2.3 percent on Monday, finishing the fiscal year with its worst quarterly performance since 2001, as investors rushed to take profits and sold blue-chips such as Toyota Motor Corp 2703.T.

Banks were also hit hard, with Mizuho Financial Group (8411.T) down over 5 percent, after U.S. financial firms fell on concerns about potential dividend cuts, with investors leery of buying ahead of a raft of indicators due out this week.

Trading house Marubeni Corp (8002.T) plunged 6.6 percent. U.S. investment bank Lehman Brothers LEH.N will file a lawsuit against Marubeni on Monday saying it was defrauded of more than $355 million, a source with direct knowledge of the matter said. [ID:nT254231].

The Nikkei lost 18.2 percent in the January-March quarter, its worst performance since the second quarter of 2001 when it tumbled 24.6 percent. It lost 27.6 percent in the full fiscal year.

Market players said it was hard to see what might lie ahead in the new financial year starting on Tuesday.

"We had window dressing last week that perhaps got a bit over-heated, leading to today's slide as investors tried to lock in profits," said Hiroaki Osakabe, referring to investor buying to boost portfolio profits ahead of the fiscal year-end.

"The market is likely to be volatile in the new fiscal year, perhaps until the summer, though some say there's the chance it may fall again. It's very hard to predict," he said.

Stocks had surged on Friday, with the Nikkei rising 1.7 percent, leading Tokyo shares to their most positive week since mid-February.

In the short term, a slew of key Japanese and U.S. indicators are due out over the next few days, including the Bank of Japan's quarterly "tankan" survey of business sentiment on Tuesday.

"All of the indicators coming out this week appear likely to point to tough times ahead, so the market may be vulnerable. But the bad news may also have been factored in to some extent," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.

The benchmark Nikkei .N225 closed at 12,525.54, down 2.3 percent or 294.93 points, after earlier falling more than 3 percent. The broader TOPIX was down 2.5 percent at 1,212.96.

BLUE-CHIPS VULNERABLE

Blue-chip shares, which were bought actively on Friday as part of window-dressing, were hit especially hard on Monday.

Toyota fell 5.2 percent to 4,970 yen, becoming one of the biggest drags on the Nikkei 225 by volume weight. Honda Motor Corp (7267.T) also slid sharply to finish down 5 percent at 2,845 yen.