(Adds stocks, details)
By Elaine Lies
TOKYO, Feb 29 (Reuters) - Japanese stocks fell over 2
percent on Friday to their lowest level in a week, with Honda
Motor <7267.T> and other exporters battered as the dollar
touched a three-year low against the yen.
Growing worries about the U.S. economy weighed on Tokyo
shares after Federal Reserve Chairman Ben Bernanke warned about
the health of small U.S. banks, hurting financial shares such as
Mizuho Financial Group <8411.T>.
Investors were wary ahead of important U.S. economic data
due out next week, including employment figures seen as critical
in determining the health of the economy.
"People are waiting for the indicators next week and nobody
really wants to bargain-hunt given the current environment,"
said Mitsushige Akino, chief fund manager at Ichiyoshi
Investment Management Co Ltd.
"If the ISM (manufacturing index) and jobs figures come in
weak, that would move closer to confirming a recession and would
be pretty ugly for stocks."
Many market players said Tokyo stocks were pushed up earlier
this week on little more than blind optimism and short-covering
in the face of a raft of negative factors, and these positions
were unwound on Friday.
"What's becoming really obvious is that the market should
actually have fallen over the last few days, not risen. What
happened was almost like a trick," said Yutaka Miura, a senior
technical analyst at Shinko Securities.
"Japanese stocks are being hit with the double punch of U.S.
stock falls and the yen's rise against the dollar."
At 0207 GMT the dollar was trading at around 104.66 yen
<JPY=> after breaking below the psychologically important 105.00
point in early Tokyo, triggering a wave of stop-loss selling
orders that pushed it down to 104.65 yen -- its lowest since May
2005.
The benchmark Nikkei was down 2.5 percent by midsession,
shedding 354.19 points to 13,571.32. The broader TOPIX <>
was down 2.5 percent at 1,319.02.
BANKS BATTERED, PROPERTY IN PAIN
Bernanke warned that small banks that had invested heavily
in real estate could collapse, renewing fears about a credit
squeeze.
Those fears were further fanned after American International
Group Inc <AIG.N> posted its biggest-ever quarterly loss on
Thursday, hurt by a write-down of derivatives exposed to bad
mortgage investments [].
Mizuho Financial Group slid 5 percent to 452,000 yen and
Mitsubishi UFJ Financial Group <8306.T> was down 3.7 percent at
950 yen. Sumitomo Mitsui Financial Group <8316.T> fell 4 percent
to 773,000 yen.
Property shares tumbled on the gloomy economic outlook, with
property developer Mitsubishi Estate <8802.T> down 3.9 percent
at 2,625 yen and Mitsui Fudosan <8801.T> down 4.2 percent at
2,185 yen.
The property subindex <.IRLTY.T> fell 4 percent, the biggest
drop among the subindices.
Exporters slid, with Honda down 3.6 percent at 3,240 yen,
Sony Corp <6758.T> down 3.5 percent at 5,040 yen, and Toyota
Motor Corp <7203.T> down 3.1 percent to 5,730 yen.
One bright spot was Seven Bank Ltd <8410.Q>, whose shares
jumped 17 percent in their market debut on Friday following a
$483 million IPO as subprime-rattled investors embraced the
firm's low-risk model of earning fees from cash machines.
Trade slowed on the Tokyo exchange's first section, with 885
million shares changing hands, compared with last week's morning
average of 961 million.
Declining stocks outnumbered advancers by a ratio of nearly
10 to one.
(Reporting by Elaine Lies, Editing by Michael Watson)
