Nikkei falls as slowdown fears persist ahead of earnings

US-MARKETS-JAPAN-STOCKS:Nikkei falls as slowdown fears persist ahead of earnings

By Sophie Knight

TOKYO (Reuters) - Japan's Nikkei share average dropped in early trade on Tuesday on growing concern that companies will slash full year forecasts when they release quarterly earnings, after the World Bank warned China's slowdown may be more protracted than thought.

Mizuho Financial Group <8411.T> dropped 3.1 percent after the company said late on Friday that it would post a 173.7 billion yen ($2.2 billion) appraisal loss on its equity portfolio for the July-September quarter.

Automakers were weak, with Suzuki Motor Co <7269.T> losing 1.5 percent after the company said its Chinese sales sank 44.5 percent in September from a year earlier after a territorial dispute triggered boycotts of Japanese goods.

The Nikkei <.N225> lost 0.7 percent to 8,802.00, with the Nikkei China 50 <.NCHN>, a list of 50 Japanese companies with high exposure to China, underperforming the broader market with a 1 percent fall.

Concern about dwindling demand in China, Japan's biggest trade partner, was heightened after the World Bank cut its growth forecast to 7.7 percent from a May forecast of 8.2 percent. ID:nL3E8L82LA]

The World Bank also flagged the United States' "fiscal cliff" -- impending tax hikes compounded by sharp cuts in government spending -- as a high risk factor, in spite of recent signs of improvement in the U.S. economy, including a surprise drop in unemployment announced on Friday.

"The market hasn't been that positive about the jobs figures because the focus is now on earnings," said Fumiyuki Nakanishi, general manager of investment at SMBC Friend Securities.

"It looks like companies are going to lean towards cutting their forecasts if anything, with the yen as it is," he added.

Many companies factored in an exchange rate of about 80 yen to the dollar during the last earnings season, but the Japanese currency has stayed robust as a "safe haven" for investors, eroding erode revenues earned abroad. The yen hovered around 78.29 to the dollar on Tuesday morning.

Mobile operator Softbank Corp <9984.T> sagged 2.8 percent in heavy trade after the Nikkei business daily said KDDI Corp <9433.T> had garnered more subscribers from the iPhone 5, partly because it allowed users to keep their phone numbers when switching carriers. KDDI gained 0.2 percent.

eAccess Ltd <9427.T>, a mobile service provider Softbank has said it will buy in a share swap worth more than $1.8 billion, gained 3.3 percent and was the second-most traded stock on the main board by turnover. It reached 48,600 yen, ending closer to the 52,000 yen per share Softbank has pledged to pay.

Also in favor were stocks of firms that make or deal in "induced pluripotent cells" or "iPS cells", after the two scientists who discovered them won a Nobel Prize.

Takara Bio Inc <4974.T>, which makes the cells, was untraded with a glut of buy orders.

The broader Topix <.TOPX> lost 0.5 percent to 733.82.

($1 = 78.1600 Japanese yen)

(Editing by Richard Pullin)

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