Nikkei drops 2.6 pct on yen, US fin sector concerns

                                
   * Nikkei ripe for profit-taking after 50% climb since March
                                
* Elpida plunges 16.6% following share issue plan
                                
* Financial shares drop amid broad sell-off, retailers down
                                
* Econ fundamentals solid, eyes on ADP, U.S. data -analyst
                                
 By Aiko Hayashi
                                
 TOKYO, Sept 2 (Reuters) - Japan's Nikkei average slid 2.6
percent on Wednesday, dragged down by exporters such as Canon Inc
<7751.T> on a stronger yen and after uncertainty over the health
of the U.S. financial sector hit Wall Street.
                                
 Elpida Memory <6665.T> plunged nearly 17 percent after
Japan's sole maker of PC memory said it will issue new shares to
raise up to $844 million, while financials including Mitsubishi
UFJ Financial Group <8306.T> fell amid a broad market sell-off.
[ID:nT154287]
                                
 "Worries about the U.S. financial system are resurfacing, led
by a downgrade on AIG. The market had climbed as those worries
were receding and if that becomes shaky again, investors will
find it hard to buy stocks," said Mitsuo Shimizu, deputy general
manager at Cosmo Securities.
                                
 "But profit-taking is dominating the market as the index has
been renewing its highs lately and that has prompted caution
among investors."
                                
  Sanford C. Bernstein Research downgraded American
International Group <AIG.N> to "underperform" from "market
perform", and said there is no reason for shareholders to
continue owning the stock, leading it to plummet on Tuesday.
[ID:nBNG39163]
                                
 In moderate trade, the benchmark Nikkei <.N225> shed 276.88
points to 10,253.18. It inched up 0.4 percent the previous day,
bringing its gains from March lows to nearly 50 percent.
                                
 The broader Topix <.TOPX> declined 2.2 percent to 947.13.
                                
 "Views on the economic fundamentals or the direction of the
stock market haven't changed as today's falls are still due to
profit-taking," said Yumi Nishimura, deputy general manager at
Daiwa Securities SMBC.
                                
 The S&P 500 <.SPX> fell 2.2 percent on Tuesday to 998.04 as
scepticism that stocks can add to a nearly 50 percent rally over
the last six months prevailed in the market.
                                
 The fall came despite data showing the Institute for Supply
Management (ISM)'s closely watched barometer of U.S. factory
activity jumped to 52.9 from 48.9 in July, the highest level
since June 2007. [nTAR001063]
                                
 In China, a pair of surveys showed on Tuesday the country's
vast manufacturing sector kept up its steady recovery last month.
[ID:nPEK62430]
                                
 Nishimura said investors will be closely watching U.S.
economic data including ADP employment data due later in the day
for more clues about a recovery in the economy.
                                
 EXPORTERS DRAG
                                
 In early Asia trade, the dollar <JPY=> was down 0.2 percent
at around 92.70 yen. Investors fret about a stronger yen as it
curbs exporters' profits when they are repatriated.
                                
 Among exporters,  Canon Inc lost 2.8 percent to 3,500 yen.
Advantest Corp <6857.T>, a chip-tester maker, shed 2.7 percent to
2,305 yen and electronics parts maker Kyocera Corp <6971.T>
declined 1.9 percent to 7,590 yen.
                                
 Toyota Motor Corp <7203.T> slid 2.2 percent to 3,930 yen,
despite its plans to raise production of its Tacoma and Tundra
pickups to meet expected demand for trucks, and to increase
production of fuel-efficient vehicles through the end of the
year. [ID:nN01510055]
                                
 Elpida Memory lost 16.6 percent to 1,282 yen after the
company said it will issue new shares as it seeks to adopt new
technologies and struggles with debt in a battered chip sector.
[ID:nT83215]
                                
 In a broad-based sell-off, financial shares fell, with
Mitsubishi UFJ Financial Group, Japan's top bank, losing 2.9
percent to 578 yen and No.2 Mizuho Financial Group <8411.T>
shedding 1.8 percent to 221 yen.
                                
 Nomura Holdings <8604.T>, Japan's biggest brokerage, slipped
1.7 percent to 806 yen.
                                
 Seven & I Holdings <3382.T>, Japan's largest retailer, sank
3.8 percent to 2,145 yen after it cut its full-year operating
profit forecast by 12 percent as a cool summer exacerbated weak
consumer spending that has hit the firm and rival stores.
[ID:nT74966]
                                
 Other retailers were also lower, with rival retail giant Aeon
<8267.T> tumbling 4.9 percent to 925 yen and Fast Retailing
<9983.T>, the operator of the casual clothing chain Uniqlo,
dropping 4.2 percent to 10,390 yen. Fast Retailing will give a
briefing on its business strategy from 1:00 p.m. (0400 GMT)
                                
 Some 1.1 billion shares changed hands on the Tokyo exchange's
first section, slightly above last week's morning average of 908
million.
                                
 Declining stocks outnumbered advancing ones by 19 to 1.
 (Editing by Joseph Radford)