*Nikkei falls 4.1 pct to 3-year closing low
*Nikkei down 10 percent in the April-September period
*Crisis worries drag after U.S. House rejects bailout plan
*Expectations for new moves from authorities provide support (Adds comment)
By Aiko Hayashi
TOKYO, Sept 30 (Reuters) - The Nikkei average slid 4.1 percent to hit a three-year closing low on Tuesday after U.S. lawmakers rejected a $700 billion bailout plan for the financial system.
Exporters such as Sony Corp 6758.T and bank shares tumbled although the Nikkei trimmed earlier losses as investors weighed the risk of a rebound on new moves from authorities.
“It looks like Congress is going to be up in arms about this for a while but there are hopes that there may be other moves from authorities such as a rate cut from the Fed,” said Yutaka Miura, deputy manager at Shinko Securities.
The focus is now on U.S. President George Bush’s statement about efforts for an economic rescue package at 1245 GMT, said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.
“Some people in the market believe some alternative measures are being worked out, and they want to see what they are when Bush speaks,” he said.
The benchmark Nikkei .N225 shed 483.75 points to 11,259.86, the lowest finish since June 2005. It earlier lost nearly 5 percent.
It has lost 13.9 percent this month and has shed 10 percent in the April-September period, the first half of the business year.
The broader Topix .TOPX declined 3.6 percent to 1,087.41, after tumbling more than 5 percent at one stage.
But others warned that even with the bailout plan approved, fundamental problems would remain.
“The real issue is that the economy is bad. It’s hard to see how far things may worsen,” said Tomomi Yamashita, a fund manager at Shinkin Asset Management. “I also think we shouldn’t expect too much from the bailout. Given the anger of ordinary Americans, the party is probably over for Wall Street.”
A tumble in stock prices also underlined other worries in Japan.
“A further drop in stock prices would affect other industries, throwing the economy into real turmoil,” said Yasunori Sato, a 54-year-old construction company employee, adding many real estate and construction firms are already on the verge of bankruptcy.
“I work in the construction business and I’m worried about my job.”
On Monday, the Dow Jones industrial average posted its biggest daily percentage slide since the 1987 stock market crash, battered by the unexpected rejection of the bailout plan. [.N]
Investors also saw the credit crisis claim several new victims, including Wachovia Corp WB.N and a bevy of European banks.
“Japanese stocks look relatively attractive now as it’s unthinkable that major Japanese financial institutions would collapse, while many peers not only in the U.S. but also in Europe are facing that fate,” said Soichiro Monji, chief strategist at Daiwa SB Investments.
Japanese financial shares fell, but the nation’s megabanks still remained above lows hit earlier this year.
Mitsubishi UFJ Financial Group 8306.T, Japan's largest bank, dropped 4.7 percent to 893 yen, compared to its low of 741 yen hit on Sept. 5.
No.2 bank Mizuho Financial Group 8411.T slid 4.1 percent to 442,000 yen. This year's low was 360,000 yen, touched on March 18.
Nomura Holdings 8604.T, Japan's biggest brokerage, tumbled 7.3 percent to 1,326 yen.
The financial crisis has deepened fears about the world economy, sending exporters sharply lower.
But Japan Steel Works Ltd 5631.T rose 1.3 percent to 1,283 yen, the top positive contributor to the Nikkei, after Nikko Citi initiated coverage with a "buy/high risk" rating, citing the firm's large global market share in steel products for nuclear and thermal power generation facilities.
Trade picked up on the Tokyo exchange’s first section, with 2.3 billion shares changing hands, compared with last week’s daily average of 1.9 billion.
Declining stocks beat advancing ones by more than 5 to 1. (Additional reporting by Elaine Lies and Anna Yokoyama; Editing by Sophie Hardach)