By Masaki Kondo Dec. 5 (Bloomberg) -- Japan stocks fell, extending a weekly loss, as a dimmer earnings outlook for lenders prompted Goldman Sachs Group Inc. to cut price targets on the nation’s biggest banks, overshadowing benefits to manufacturers from oil’s decline. Mitsubishi UFJ Financial Group Inc. and Mizuho Financial Group Inc. Japan’s biggest listed banks, dropped more than 5 percent, driving a gauge of lenders to a two-week low. Toyo Tire & Rubber Co., Japan’s fourth-largest tiremaker, surged 8 percent after crude sank to the lowest level in almost four years. Orix Corp. erased an 11 percent plunge to rise 0.5 percent after saying it asked authorities to investigate “ill-founded” rumors. “Earnings at financial companies will inevitably worsen. You can’t rule out the possibility that smaller players will fail,” said Naoteru Teraoka, who helps oversee $21 billion at Chuo Mitsui Asset Management Co. in Tokyo. “Higher oil prices have been the main cause of inflation, so their decline is positive in that it lowers costs for manufacturers.” The Nikkei 225 Stock Average swung between gains and losses, and closed down 6.73, or 0.1 percent, to 7,917.51 in Tokyo. The broader Topix index slipped 2.86, or 0.4 percent, to 786.02. The Nikkei posted a 7 percent weekly drop, the biggest since the five days ended Oct. 24, while the Topix lost 5.9 percent. Oil has fallen 70 percent from a record $147.27 a barrel on July 11 as expectations evaporated that demand in emerging markets would make up for a slowdown in developed countries. Merrill Lynch & Co. commodity strategist Francisco Blanch yesterday said oil may sink below $25 a barrel next year if the global recession spills over into China. To contact the reporter for this story: Masaki Kondo in Tokyo at mkondo3@bloomberg.net.

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