REFILE-Nikkei slips 0.8 pct, exporters fall on demand woes

                                
 * Nikkei slips in thin trade, exporters down on demand woes
                                
 * But downside seen solid on bargain-hunting
                                
 * Banks weak on worry about health of U.S. peers
                                
 * Little impact from opposition political scandal
 (Corrects day in first paragraph to Wednesday from Tuesday)
                                
 By Elaine Lies
                                
 TOKYO, March 4 (Reuters) - Japan's Nikkei stock average fell
0.8 percent on Wednesday, with Honda Motor Co <7267.T> and other
exporters slipping despite a weaker yen on growing worry about
demand as the global recession bites deeper.
                                
 Mitsubishi UFJ Financial Group <8306.T> and other banks fell
as well on persistent worry about the health of their U.S. peers,
though bargain-hunting by an array of investors was seen keeping
support solid above a 26-year low just under 7,000.
Fast Retailing Co <9983.T> bucked the trend to rise after
solid February sales at its Uniqlo casual clothing chain.
"There's buying by public pension funds and also by
individual investors, who have been buying on dips since about
the third week of February," said Hideyuki Ishiguro, a supervisor
in the investment advisory section of Okasan Securities.
                                
 "Of course, individual investors are the first to sell when
the market recovers at all."
                                
 Investors remained skittish, with many reluctant to buy
actively despite the encouragement offered by possible Japanese
government proposals to prop up the stock market.
                                
 "Nobody has any strong sense of whether we've hit the bottom
or not, so few are willing to buy aggressively until this has
been confirmed," said Tomomi Yamashita, a fund manager at Shinkin
Asset Management.
                                
 Sentiment also came under pressure as Japanese opposition
leader Ichiro Ozawa came under fire after a close aide was
arrested in a fundraising scandal ahead of an election his party
has looked likely to win. [ID:nT328584]
                                
  Market players said that while the news would not lead to
selling, the scandal was likely to prompt some investors -- in
particular foreigners, who often give the Nikkei direction -- to
postpone stock buying for a while.
                                
  "Basically, this means the two parties won't be able to
compromise at all," said Ishiguro.
                                
 "Then of course the Democrats will lose support and will have
a harder time taking power in an election. This means the policy
paralysis will just go on."
                                
 The benchmark Nikkei <.N225> shed 59.55 points to 7,170.17,
above a four-month low of 7,088.47 hit on Tuesday and not far
above a 26-year low of 6,994.90 touched in October.
                                
 The broader Topix <.TOPX> shed 1 percent to 719.88. It closed
at a 25-year low on Tuesday.
                                
 HOPES AND FEARS
Japan's government said last week it was looking at ways to
support the stock market, which could include setting up a
share-buying agency as was done in the mid-1960s.
                                
 On Tuesday, Finance Minister Kaoru Yosano said on Tuesday the
government would use some of Japan's large foreign exchange
reserves to ease a squeeze in corporate finance, as annual book
closing looms for many Japanese companies.
 Market players said that while these comments continue to
offer the market some encouragement, the government will have to
start moving to concrete plans soon.
                                
 "They can only propose things once or twice more, but when it
comes to actually carrying them out there's still a lot of
debate," Ishiguro said. "Hope will start to fade."
                                
 Exporters fell despite the dollar gaining 0.3 percent against
the yen, rising to around 98.44 yen <JPY=>, with market players
blaming it on demand worries amid a grim economic climate.
                                
 Honda Motor Co <7267.T> fell 4.4 percent to 2,185 yen,
becoming the biggest drag on the Nikkei 225 by volume weight.
Toyota Motor Corp <7203.T> lost 3.3 percent to 2,960 yen after
U.S. auto sales dropped by more than 41 percent in February to
the lowest level in almost three decades. [ID:nN03494844]
                                
 Nissan Motor <7201.T> shares erased previous losses to edge
up 0.7 percent to 305 yen. The Nikkei business daily reported
that the automaker expects its global output for the first half
of the next business year to fall 27 percent to its lowest level
in eight years. [ID:nT8665]
                                
 Mitsubishi UFJ Financial Group slipped 1.7 percent to 414
yen, with Mizuho Financial Group <8411.T> down 1.1 percent to 174
yen and Sumitomo Mitsui Financial Group <8316.T> losing 2.5
percent to 2,910 yen.
                                
 But Fast Retailing climbed 2.8 percent to 9,640 yen after
saying same-store sales at Uniqlo rose 4.2 percent year-on-year
in February, thanks to solid sales of spring items.
                                
 Inpex <1605.T> rose 1.4 percent to 597,000 yen after oil
prices rose nearly 4 percent on Tuesday amid expectations
producer group OPEC will cut output again. <CLc1> [O/R]
                                
 Trade was light on the Tokyo exchange's first section, with
868 million shares changing hands, compared with last week's
morning average of 967 million.
                                
 Declining stocks outpaced advancing ones, 799 to 740.
 (Reporting by Elaine Lies; Editing by Edwina Gibbs)