Nikkei edges down, but banks defy trend to surge

                                
 * Nikkei edges down, but buoyed by banks despite Mizuho loss
                                
 * Some support from gains in U.S. banks after good earnings
                                
 * KDDI down as earnings disappoint, steel slips on downgrade
                                
 * Market eyes results of U.S. bank stress tests
                                
 By Elaine Lies
                                
 TOKYO, April 24 (Reuters) - Japan's Nikkei stock average
edged down on Friday as mobile phone operator KDDI <9433.T> slid
on disappointing earnings, but falls were checked as banks surged
after better-than-expected results for U.S. regional banks.
Steel firms lost ground on a brokerage downgrade, including
world no. 3 JFE Holdings <5411.T>, which announces earnings later
on Friday.
                                
 Mizuho Financial Group <8411.T> and Sumitomo Mitsui Financial
Group <8316.TT> climbed over 7 percent, pushing the banking
sub-index to a one-week high despite Mizuho's warning that it
would fall to an annual net loss of $5.9 billion. [ID:nT203882]
                                
 Analysts said that in addition to positive sentiment carried
over from U.S. trade and the view that the worst of Mizuho's woes
were behind it, the sector was simply ripe for short-covering.
                                
 Mizuho had lost 11 percent between April 9 and Thursday while  Sumitomo Mitsui had fallen 17 percent over the same period.
                                
 "There may be a bit of a boost from banks in the U.S., but
mainly it's just that short positions had piled up in the market,
and investors are eager to cover those ahead of the upcoming
'Golden Week' holidays," said Koichi Ogawa, chief portfolio
manager at Daiwa SB Investments.
                                
 "The market right now is technical and very hard to read,
though it does appear as if the March rally in stocks around the
world may well have hit a ceiling recently."
                                
 The benchmark Nikkei <.N225> shed 29.05 points to 8,817.96,
while the broader Topix <.TOPX> rose 0.2 percent to 841.23.
                                
 Most in the market said the Nikkei was likely to move in a
tight range over the next week or so, solidly supported but with
investors skittish ahead of the results of U.S. bank "stress
tests".
                                
 Those results are due out on May 4, but U.S. regulators begin
discussing their findings with the banks on Friday and U.S.
officials will outline publicly the process they followed.
                                
 "We're seeing a lot of U.S. earnings results coming in better
than expected, and that's giving rise to a sense of recovery --
although of course it's still far too soon to know if that
recovery is real or not," said Nagayuki Yamagishi, a strategist
at Mitsubishi UFJ Securities.
                                
 Investors were homing in on individual shares as Japan moves
deeper into earnings season. Nomura Holdings <8604.T>, Japan's
biggest brokerage, also announces earnings later in the day.
                                
 BANKS, KDDI, STEEL
                                
 Sumitomo Mitsui gained 7.6 percent to 3,180 yen and Mizuho
rose 7.3 percent to 206 yen. The banking sub-index <.IBNKS.T>
rose 3.8 percent, becoming the top gainer among the subindices.
                                
 But those gains were unable to offset downward pressure from
a slew of shares, ranging from defensives to automakers.
                                
 Among the biggest drags on the Nikkei 225 was KDDI, Japan's
second-biggest wireless carrier, which sank 5.2 percent to
440,000 yen.
                                
 KDDI forecast only a 6 percent rise in operating profit to
470 billion yen ($4.8 billion) for the year to March, citing a
decline in sales expenses, below the average 478.5 billion yen
profit projected by eight brokerages polled by Reuters.
                                
 Shares of Nippon Steel <5401.T> and JFE Holdings fell after
Goldman Sachs downgraded its ratings on the stocks to "sell" from
"neutral", saying further upside in their stock prices appears to
be limited after sharp gains.
                                
 Nippon Steel lost 2 percent to 348 yen, while JFE declined
2.7 percent to 2,835 yen.
                                
 Automakers slipped after a person with direct knowledge of
Chrysler LLC's plan said it has been preparing a bankruptcy
filing as a contingency, although it has a week remaining to
clinch a deal with Italy's Fiat <FIA.MI>. [ID:nLN620342]
Honda Motor Co <7267.T> slipped 1.3 percent to 2,725 yen and
Nissan Motor Co <7201.T> fell 2.1 percent to 508 yen. Toyota
Motor Corp <7203.T> edged down 0.3 percent to 3,880 yen.
                                
 Trade picked up on the Tokyo exchange's first section, with
1.4 billion shares changing hands, compared with last week's
morning average of 1.2 billion.
                                
 Declining stocks outnumbered advancing ones, 851 to 697.
 (Reporting by Elaine Lies; Editing by Edwina Gibbs)