Nikkei loses 1.4 pct as banks slip amid gloom

                                
 * Nikkei sheds 1.4 percent in muted trade
                                
 * Banks weigh after U.S. peers fall on nationalisation worry
                                
 * Seven & I slides on report of unit probe
                                
 * Weak yen fails to boost exporters
  (Adds stocks, details)
                                
 By Elaine Lies
                                
 TOKYO, Feb 20 (Reuters) - Japan's Nikkei stock average fell
1.4 percent on Friday, with banks losing ground amid growing
gloom about the U.S. economy even as worries about Japan's
situation kept exporters from taking advantage of a weak yen.
                                
 Seven & I Holdings <3382.T>, Japan's largest retailer, fell
over 5 percent after saying that the country's anti-monopoly
watchdog was investigating whether its Seven-Eleven convenience
store chain restricted franchise holders from marking down
certain items. [ID:nT220186]
                                
 Kirin Holdings <2503.T> edged down 0.9 percent after the
Nikkei business daily said the Japanese beer maker has agreed to
buy a 43.25 percent stake in a San Miguel Brewery Inc <SMB.PS>
affiliate of Philippine foodmaker San Miguel Corp <SMC.PS> for
about 100 billion yen ($1.06 billion). [ID:nN19256778]
                                
 Market players said the failure of exporters to gain after
the dollar rose to a fresh 6-week high over 94 yen could become
a problem if it persists. The dollar was steady <JPY=> in Tokyo
time.
"The market really needs to make use of this weaker yen or
there could be big problems next week. It's wasting this
opportunity," said Masayoshi Okamoto, head of dealing at Jujiya
Securities, noting that the stronger yen took a huge toll on
earnings for many blue-chip companies.
                                
 Investors fret about a stronger yen because it eats into
exporter profits when they are repatriated, and with the end of
the business year only five weeks away and many firms facing
grim results, Okamoto said every bit of yen weakness could help.
                                
 But others in the market said the cheaper yen this time was
a symptom of broader problems amid growing worry about Japan's
economy. Data on Monday showed the economy suffered its worst
quarterly decline since the 1974 oil crisis. [ID:nT74412]
                                
 "This time, the weaker yen isn't a good thing. It's part of
a broader 'sell Japan' trend," said Masayoshi Yano, senior
market analyst at Meiwa Securities.
                                
 The benchmark Nikkei <.N225> shed 102.25 points to 7,455.40,
while the broader Topix <.TOPX> lost 0.9 percent to 745.18.
If the Topix closes at that level, it will be the lowest
close since 1984.
                                
 EYES ON SEVEN & I
                                
U.S. investor fears that banks could be nationalised drove
their stocks to a 17-year low, with the KBW banks index <.BKX>
falling to its lowest level since 1992, led by a 14 percent
slide in Bank of America <BAC.N> shares.
                                
 Japanese banks slipped as well, with Mizuho Financial Group
<8411.T> down 2.6 percent at 191 yen and Mitsubishi UFJ
Financial Group <8306.T> down 1.6 percent at 432 yen. Sumitomo
Mitsui Financial Group <8316.T> lost 0.7 percent to 3,010 yen.
 Seven & I became the fourth-largest drag on the Nikkei 225
by volume weight after the Asahi newspaper reported that the
Fair Trade Commission is investigating whether Seven-Eleven, in
violation of antimonopoly regulations, pressured franchise
stores not to mark down daily food items such as boxed meals
that were near their expiration dates.
                                
 In a statement, the company said that the FTC was
investigating and that Seven and I was cooperating fully.
                                
 Seven & I shares fell 5.1 percent to 2,145 yen.
                                
 Another drag was Bridgestone Corp <5108.T>, which fell 6.5
percent to 1,263 yen after the world's top tyremaker posted an
86 percent fall in quarterly operating profit and forecast a
bigger-than-expected slide this year as it grapples with weak
demand and a stronger yen.
                                
 Tech shares fell after a disappointing outlook from
Hewlett-Packard Co <HPQ.N> dragged down other tech shares in the
United States, while exporters -- many of which rose briefly
just after the opening -- gave up their gains as investors
turned to defensive shares.
                                
 But T&D Holdings <8795.T> bucked the trend, soaring 12.4
percent to 2,210 yen after the insurer said it would raise 69.8
billion yen ($741 million) through a new share issue to boost
the capital of its life-insurance units. [ID:nT167613]
                                
 Trade was light on the Tokyo exchange's first section, with
842 million shares changing hands, compared with last week's
morning average of 896 million.
                                
 Declining stocks outpaced advancing ones by 2 to 1.
                                
 (Reporting by Elaine Lies; Editing by Brent Kininmont)