* Worries over U.S. economy again weigh on markets
* Nikkei down 2.6 pct, erasing Monday's rally
* Government bonds rise as move to havens continues
* Yen up 4th straight month, no intervention seen for now
By Kevin Plumberg
TAIPEI, Aug 31 (Reuters) - Japan led Asian stocks lower on
Tuesday as worries about the flagging U.S. economy triggered
profit taking across the region and fed a five-month rally in
U.S. and Japanese government bonds.
With policymakers around the world cautious about adding
new stimulus measures to support their recoveries, safety has
been the name of the game in August.
Gold prices have risen around 5 percent this month, on
track for the largest monthly gain since April, while the
benchmark yield on the 10-year U.S. Treasury note dropped 38
basis points in August, its biggest drop since December 2008.
Investors ignored slightly stronger-than-expected U.S.
consumption data and focused on the August U.S. payrolls report
due on Friday to see if private sector hiring held up despite
expected layoffs in the public sector.
A disappointing payrolls figure for a third consecutive
month will likely depress bond yields further and put upward
pressure on the yen, which is hovering near a 15-year high
against the dollar.
"Though the U.S. spending data yesterday wasn't bad, it's
the indicators out later this week that are the really
important ones, and predictions for these are really raising
fears about the economic recovery," said Takashi Ushio, head of
the investment strategy division at Marusan Securities in
Tokyo.
Japan's Nikkei share average <> slid 2.6 percent, led
by a mix of technology and retailing stocks.
The Nikkei has tumbled more than 6 percent in August, set
for the largest monthly decline since May, on worries that the
global recovery may be stalling and as the surging yen
threatened to curb exports, the one bright spot in the
country's economy.
The MSCI index of Asia Pacific stocks outside Japan slipped
0.9 percent <.MIAPJ0000PUS>, with commodity-related shares the
biggest drag on fears of weaker demand for raw materials.
The region has fared better in August than others, however,
thanks to its relatively strong growth prospects. The Asia
Pacific ex-Japan index is down 1.7 percent in August compared
with the 3.7 percent decline on the MSCI world equities index
<.MIWD00000PUS>.
The yen has strengthened for four straight months against
the dollar, its longest string of gains since 2008. On Tuesday,
the dollar was down 0.2 percent to 84.45 yen <JPY=>, near a
15-year low of 83.58 yen touched last week.
The Bank of Japan boosted a cheap loan scheme on Monday
after an emergency meeting, but investors saw the move as a
minimal, symbolic gesture that will do little to halt the yen's
climb. []
Market players may now test the government's resolve to
back its words with yen-selling intervention, analysts said,
though few expect it to move any time soon unless the
currency's gains accelerate.
Even then, traders said intervention would not have much
effect in weakening the yen unless it is backed by aggressive
monetary easing.
The Australian dollar jumped after a report showed retail
sales blew past expectations, up 0.2 percent to US$0.8935
<AUD=>, 3 cents below a three-month high reached in early
August.
Government bonds rose as equity markets sagged.
The 10-year U.S. Treasury yield slipped to 2.53 percent
from 2.55 percent <US10YT=RR> late on Friday in New York.
After a sharp drop on Monday, Japanese government bond
futures rose 0.28 point to 142.73 <2JGBv1>.
However, supply concerns could haunt long-maturity paper
after Japan's Prime Minister Naoto Kan said the government
could compile an extra budget if necessary, after the cabinet
decided on Monday to compile economic steps using reserves from
this fiscal year's budget.
(Additional reporting by Elaine Lies in TOKYO)
(Editing by Kim Coghill)
