Nikkei falls 0.7 pct as Toyota skids, but banks gain

                                
 * Toyota drops after forecasting bigger-than-expected loss
                                
 * Financial shares jump on optimism about U.S. banking system
                                
 By Aiko Hayashi
                                
 TOKYO, May 11 (Reuters) - Japan's Nikkei average fell 0.7
percent on Monday, after earlier hitting its highest point in six
months, as Toyota Motor Corp <7203.T> skidded after forecasting a
much bigger-than-expected $8.6 billion annual loss.
                                
 But financial shares such as Mizuho Financial Group <8411.T>
surged on optimism about the U.S. banking system and the economy
as regulators said most U.S. banks were sound. [ID:nN07333426]
                                
 "The market is finding it hard to keep surging after rising
some 30 percent from a March low. There's also a torrent of
earnings reports this week in Japan and that's keeping trade in
check," said Kenichi Hirano, operating officer at Tachibana
Securities.
                                
 The benchmark Nikkei <.N225> shed 60.95 points to 9,371.88,
after touching its highest point since Nov. 5 at one stage.
                                
 It has recovered about 33 percent from an intraday low hit on
March 10.
                                
 The broader Topix <.TOPX> dipped 0.1 percent to 894.19.
                                
 U.S. jobs data on Friday added to optimism about the U.S.
economy. The 539,000 jobs cut by employers in April was the
smallest reduction since October, and hinted at some improvement
in the U.S. labour market. [ID:nN07416806]
                                
 Japan's earnings season continues this week, with Takeda
Pharmaceutical <4502.T> and Isuzu Motors Ltd <7202.T> among
companies set to announce results on Monday.
                                
 Nissan Motor Co <7201.T>, Sony Corp <6758.T> and Mizuho
Financial Group are due to report later in the week.
                                
 TOYOTA FALLS
                                
 Shares of Toyota, the world's biggest automaker, lost 5
percent to 3,780 yen. [ID:nT285085]
                                
 "The Toyota forecast dampened investor appetite for the
stock, as investors need to see companies outlining prospects of
a V-shape recovery in the second-half of the business year before
they buy," Tachibana Securities' Hirano said.
                                
 For January-March, the automaker booked a $6.9 billion loss,
in line with consensus estimates, and cut its annual dividend by
nearly 30 percent -- the first cut since at least 1994, when it
changed its reporting period.
                                
 Other automakers also fell. Honda Motor Co <7267.T> shed 3.1
percent to 2,860 yen and Nissan Motor Co <7201.T> dropped 4.4
percent to 503 yen.
                                
 Shares of Bridgestone Corp <5108.T>, Japan's largest tyre
maker, tumbled 6.9 percent to 1,453 yen after the company on
Friday widened its group operating loss forecast for the six
months ending in June to 40 billion yen from 12 billion yen,
citing falling sales due to the poor economy and a strong yen.
                                
 But Japan's banking subindex <.IBNKS.T> advanced 2.9 percent.
                                
 Mizuho climbed 5.7 percent to 260 yen, while top lender
Mitsubishi UFJ Financial Group <8306.T> rose 4.7 percent to 686
yen.
                                
 Nomura Holdings Inc <8604.T>, Japan's biggest brokerage,
gained 3.7 percent to 721 yen.
                                
 Trade was active on the Tokyo stock exchange's first section,
with 1.5 billion shares changing hands, up from last week's
morning average of 1.3 billion.
                                
 Advancing stocks outnumbered declining ones, 881 to 678.
 (Reporting by Aiko Hayashi; Editing by Joseph Radford)