* Nikkei falls below key support at 9,400
* Risk of further losses, possibly to 8,800
* Exporters hurt after weak U.S. job data raises doubts on growth
* Tepco nosedives, TSE head quoted as favouring court-led rehabilitation
* Tepco worries drag down banking shares, other utilities
By Hideyuki Sano
TOKYO, June 6 (Reuters) - The Nikkei average closed at an 11-week low on Monday as speculation that Tokyo Electric Power Co could enter court-led restructuring pummelled its shares and fanned bearish sentiment that set in after soft U.S. data.
The Nikkei's break below key support highlighted the risk of further falls in the near term, with investors also fretting about slower global growth.
The Nikkei fell 1.2 percent to 9,380.35, breaking below its 9,400-10,000 range of the past two months, while the broader Topix declined 1.1 percent to 807.99, its lowest finish since mid-March.
With the Nikkei's well-worn range broken it may now move into a new 600-point range with 9,400 as resistance, said Eiji Kinouchi, chief technical analyst at Daiwa Securities Capital Markets.
"The Nikkei could fall to around 8,800 before it starts recovering in late June," Kinouchi said, with the yen likely to start weakening around that time. He said the yen has started to weaken about three months after hitting a peak in the wake of three major events -- previous major earthquakes in Japan in 1995 and 1923, and the 2008 financial crisis.
Tokyo Electric, known as Tepco, closed down 27.6 percent at 207 yen. At one point it fell by its daily limit to a record low of 206 yen, just 2 percent of its peak in 1987, after the head of the Tokyo Stock Exchange, Atsushi Saito, was quoted as saying the troubled nuclear operator should go through a court-led restructuring. ID:nL3E7H605M]
A bourse spokesman said Saito's comment was only his personal opinion, but the remark rekindled worries that the company's shares could be delisted and its shareholders made to shoulder losses and have their equity wiped out.
The government has promised to help Tepco handle compensation claims by thousands of households and businesses forced to evacuate due to radiation from its Fukushima nuclear plant, where reactor cooling systems were knocked out by the March 11 earthquake and tsunami, but doubts about the plan remain with Prime Minister Naoto Kan under pressure to resign.
"The market is pricing in the risk of a Tepco bankruptcy," said a fund manager at a Japanese asset management firm. It's clear that Tepco's capital is not enough to cover the damage claims. It can pay if it can raises electricity charges, but that seems difficult in the current political climate."
Banking shares led the losses, with their subindex falling 1.8 percent as investors worry that banks may have to shoulder bigger losses on loans the Tepco if it goes under.
Among banking stocks, Mitsubishi UFJ Financial Group fell 3 percent to 359 yen, Sumitomo Mitsui Financial Group dropped 1.9 percent to 2,269 yen and Mizuho Financial Group shed 0.8 percent to 121 yen.
Bank shares have been suffering since last month after Chief Cabinet Secretary Yukio Edano said the public would not accept government financial support for Tepco unless its banks waived some pre-quake loan terms.
The fall in Tepco shares also hit other utilities, with investors seeing a risk that Kansai Electric Power and other utilities may be asked to help in the Tepco compensation scheme.
This played out against the backdrop of growing worries that the global economy is losing traction
A U.S. payrolls report on Friday showed only 54,000 jobs were added in May, the weakest reading since September, while the unemployment rate rose to 9.1 percent from 9 percent in April. [ID:nOAT004818]
Fears of slower growth helped to drive down exporters' shares, with Komatsu Ltd , the world's No.2 construction machinery maker, falling 2.1 percent to a near-three-month low. Shares in Sony Corp , hit by hacker attacks on its networks, fell 3.2 percent to a two-year low.
Volume was steady with 1.9 billion shares changing hands on the main board, in line with the last week's volume. Underscoring the bearish mood in Tokyo the number of declining shares exceeded 1,000. Decliners outpaced advancing shares by 1,127 to 442. (Additional reporting by Ayai Tomisawa; Editing by Michael Watson)