Japan stocks down as trade, steel stocks dumped

(Adds comment, stocks)

By Aiko Hayashi

TOKYO, Dec 5 (Reuters) - Japanese stocks fell for a third straight day on Wednesday, dragged lower by trading houses such as Mitsui & Co Ltd (8031.T: Quote, Profile, Research, Stock Buzz) and steel and machinery makers on growing concerns about the global economy.

Bank shares also struggled after their U.S. peers were punished due to uneasiness about fallout from the credit squeeze.

"Trading houses and steel makers have become the main drag on the market, in a shift from subprime-related shares, because of the growing worries about the global economy," said Soichiro Monji, chief strategist at Daiwa SB Investments' equity management department.

Naoki Koga, senior fund manager at Toyota Asset Management, said the market will probably move to cement the downside in December and January, but a lot still depends on where the subprime problems will go.

"After a robust sell-off, stocks now look cheap to investors but they can't decide if now is the best time to buy," Koga said.

The benchmark Nikkei .N225 ended the morning session down 0.4 percent or 54.26 points at 15,425.93.

The broader TOPIX index shed 0.5 percent or 7.45 points to 1,508.05.