Japan stocks down as autos stall, Yahoo Japan jumps

(Adds comment, stocks)

By Aiko Hayashi

TOKYO, Dec 4 (Reuters) - Japanese stocks slipped on Tuesday, dragged down by machinery makers such as Komatsu (6301.T) after weaker manufacturing data pushed down Wall Street, renewing worries about the U.S. economy.

But Yahoo Japan Corp's (4689.T) link-up with eBay Inc (EBAY.O) fuelled gains in Softbank Corp (9984.T), which owns a big stake in the Japanese auctioneer.

Despite the market fall, market participants said the downside looks limited for Japanese stocks.

"Market sentiment is actually not bad as there's a possibility the subprime problems will come to an end on Paulson's plan," said Masaki Iso, chief investment officer at Yasuda Asset Management Co Ltd.

U.S. Treasury Secretary Henry Paulson said on Monday he hoped a plan to help homeowners facing mortgage-rate spikes would be ready by the weekend and expressed faith the economy would dodge a recession despite the deep housing slump. [ID:nN03421142]

"But investors will watch U.S. stocks' moves as economic data there is not strong," Iso said.

Katsuhiko Kodama, a senior strategist at Toyo Securities, said the downside seemed limited, aided by an expected U.S. rate cut next week and the presence of foreign investors who increasingly see Japanese stocks as oversold.

The benchmark Nikkei average .N225 ended the morning session down 0.5 percent or 78.69 points at 15,550.28.

The broader TOPIX index shed 0.6 percent or 8.96 points to 1,523.20.

The U.S. market fell on Monday after the Institute for Supply Management said its index showed factory activity in November fell to its lowest since January.

Trade slowed on the Tokyo exchange's first section, with 841 million shares changing hands, compared with last week's morning average of 930 million.

Declining stocks beat advancers ones by a ratio of nearly three to one.

YAHOO JAPAN SHINES

Komatsu, the world's No.2 maker of earth-moving equipment, skidded 5.4 percent to 3,180 yen, the biggest drag on the Nikkei 225, while industrial robot maker Fanuc Ltd (6954.T) lost 1.2 percent to 11,160 yen.