Nikkei slips on global growth worries; U.S. data eyed

TOKYO (Reuters) - Japan's Nikkei stock average fell for a second straight day on Thursday and dropped below the closely watched 9,000 line, hurt by the yen's persistent strength and fears the United States might be heading for another recession, with many investors on the sidelines ahead of U.S. economic data.

Analysts said that light volume also made the market vulnerable to declines, with futures selling kicking in during the afternoon when falls in Asian stocks added to concerns.

They said the mood was also soured by capital flows data that showed foreign investors' net selling of Japanese shares hit their highest in more than a year last week.

"There is risk reduction being seen among foreign investors with currency levels (the yen) showing elevated levels," said Mattia Ciancaleoni, director of equity sales at Citigroup.

The benchmark Nikkei .N225 fell 1.3 percent to 8,943.76, slipping further from a one-week intraday high of 9,150.31 hit on Tuesday.

The broader Topix index .TOPX shed 1.2 percent to 767.31.

While U.S. data such as consumer prices and existing home sales numbers are due on Thursday, Ciancaleoni said investors are focusing on whether Fed Chairman Ben Bernanke will drop any hints about further monetary easing measures when he speaks at a regional event in Jackson Hole, Wyoming, next week.

Chip-related shares underperformed as a disappointing sales outlook from Dell (DELL.O) fanned worries that weaker economic growth will hurt earnings in the third quarter and sent U.S. tech shares tumbling.

"The biggest problem for investors right now is the strong yen," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.

NARROW RANGE

This week the dollar has traded in a narrow range just above its record low of 76.25 yen. But Tokyo currency traders say the greenback could test that level next week when more market participants return from summer vacation and as many exporters may sell the dollar in month-end transactions.

A strong currency undermines the value of Japanese exporters' overseas profits, and also makes Japanese shares less attractive to investors holding other currencies.

Among chip-related shares, Advantest (6857.T) fell 4.3 percent to 1,069 yen and Tokyo Electron (8035.T) shed 3.4 percent to 3,580 yen.

Consumer electronics makers were also weaker, with Toshiba (6502.T) dropping 4.5 percent to 322 yen and Hitachi (6501.T) shedding 2.4 percent to 409 yen.

But Fast Retailing (9983.T), operator of the Uniqlo casual clothing chain and a widely held stock among domestic investors, rose 3.3 percent to 14,850 yen after Goldman Sachs raised its rating to "buy" from "neutral," citing growing demand in Asia.

Beer maker Asahi Group Holdings (2502.T) gained 1.7 percent to 1,616 yen after it said it would buy all shares in New Zealand's Independent Liquor Ltd from its two investment-fund owners for 98 billion yen ($1.3 billion) next month.

Volume was thin, with 1.7 billion shares changing hands on the Tokyo Stock Exchange's main board, against last week's average daily volume of 2.4 billion. Declining shares outnumbered advancing ones by 1,122 to 417. ($1 = 76.565 Japanese Yen)

(Additional reporting by Hideyuki Sano and Lisa Twaronite; Editing by Chris Gallagher)