RTRS: Nikkei falls on yen rise, economic woe, earnings
* Nikkei loses 3.1 pct but up 3.2 pct for week
* Benchmark falls 9.8 pct for month, worst month since Oct
* Toshiba tumbles on ratings cut, earnings, merger talk
* Gloom grows after record fall in industrial production (Adds stocks, details)
By Elaine Lies
TOKYO, Jan 30 (Reuters) - Japan's Nikkei stock average lost 3.1 percent on Friday, sliding on growing economic woe and a tumble by Toshiba Corp (6502.T: Quote, Profile, Research, Stock Buzz) after it was hit by news it may merge part of its chip operations, a loss forecast, and a ratings cut.
Dismal news struck a slew of other companies.
Nintendo Co (7974.OS: Quote, Profile, Research, Stock Buzz) plunged after it cut its Wii game console sales target and profit forecasts, while Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz) fell after a source said its annual operating loss is likely to exceed the automaker's latest forecast. [ID:nT139304] [ID:nTKF104269] The benchmark Nikkei .N225 gained 3.2 percent on the week, largely due to a three-day winning streak that included one day of 4.9 percent gains.
But it was down 9.8 percent for the month and the year -- its worst month since October, when it fell 24 percent -- largely on the yen's continuing strength against the dollar.
Worries about a deepening recession were fed by economic data released in both the United States and Japan, including Japanese industrial production falling a record 9.6 percent in December and unemployment hitting a three-year high.
"The industrial production data was abysmal, and looking through the data in detail was quite a shock," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities.
"There's so much inventory built up in a way we haven't really seen before," he added, noting that chip firms were likely to be hit especially hard.
U.S. data showed the amount of people filing for unemployment benefits hit a record in mid-January, while orders for long-lasting goods fell for the fifth straight month in December and new home sales slid to a record low. [.N]
Market players said that while poor Japanese earnings have been largely factored in over the longer term, investors are watching U.S. economic data even more keenly.
"Everyone knew beforehand that earnings would be bad, and the figures coming out have simply verified this," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.
"But if some really bad U.S. indicators come out in February, fears for the current quarter's earnings will really increase, and the market could test the downside."
The Nikkei shed 257.19 points to 7,994.05, while the broader Topix .TOPX lost 3 percent to 794.03.
Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz), in results out after the close, posted a 63 percent drop in quarterly operating profit and lowered its annual profit forecasts for a fourth time this year, while NEC (6701.T: Quote, Profile, Research, Stock Buzz) also posted a loss.
Hitachi Ltd (6501.T: Quote, Profile, Research, Stock Buzz) said it now expects a group net loss of 700 billion yen in the year to March instead of a profit of 15 billion yen.
TOSHIBA TUMBLE
Toshiba, which fell 17.4 percent to 318 yen, warned on Thursday it would report its biggest loss ever this business year and said it may spin off some of its chip operations, a move that would make it easier to merge those businesses with another firm.
On Friday, a person with knowledge of the negotiations said Toshiba was in talks to merge part of its chip operations with the semiconductor unit of NEC as the two firms struggle with slumping demand and prices. [ID:nT241049]
Market players had different views of the potential tie-up, with some saying it was a good move while others disagreed.
"It shows they can't survive on their own," said Fumiyuki Nakanishi, a manager at SMBC Friend Securities. "Despite some cost cut impact, it's doubtful if they can beat their international rivals even as a team. The domestic chip industry appears on the brink of death."
Goldman Sachs cut its rating on Toshiba to "sell" from "neutral".
Nintendo fell 12.4 percent to 28,300 yen after the videogame maker cut its operating profit forecast for the year ending March 31 by 16 percent to 530 billion yen ($5.92 billion) due to a firmer yen.
The yen advanced against the dollar, which had fallen to 89.36 yen by mid-afternoon after starting the day above 90 yen . A strong yen hits shares by eating into exporter profits when repatriated.
Toyota fell 4.1 percent to 2,925 yen and Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz) lost 9.2 percent to 2,070 yen.
Before their results landed, Hitachi had ended trade down 6.7 percent at 294 yen, while NEC lost 6.5 percent to 245 yen.
Despite the gloom, a few firms gained.
Konica Minolta (4902.T: Quote, Profile, Research, Stock Buzz) surged 11.3 percent to 712 yen despite slashing its annual profit forecast for this business year on a generally positive response from analysts to new restructuring plans. Trade picked up, with 1.97 billion shares traded on the Tokyo exchange's first section compared to last week's daily average of 1.77 billion.
Declining shares outnumbered advancing shares by more than 3 to 1. ($1=89.59 yen) (Additional reporting by Tokyo newsroom; Editing by Brent Kininmont)
