Japan's TOPIX falls 1.8 pct as banks slide

TOKYO, Sep 18 (Reuters) Japan's TOPIX index fell 1.8 percent on Tuesday, dragged down by banks such as Mizuho Financial Group Inc that tracked financial stock falls in overseas markets due to widening credit concerns.

Consumer loan companies including Aiful Corp and Takefuji Corp were also sold heavily after medium-ranking peer Credia Co became Japan's first listed consumer lender to fold amid an industry clampdown by lawmakers and the courts.

"Overseas investors are selling on a weaker outlook for the Japanese economy," said Zenshiro Mizuno, senior managing director at Marusan Securities.

"And investors are putting off buying ahead of the Fed meeting," he said, referring to the U.S. Federal Reserve, which is expected to cut interest rates in the wake of surprisingly weak jobs data and market turmoil due to subprime mortgage market problems.

As of 0056 GMT, the benchmark Nikkei was down 1.6 percent at 15,863.95. The broader TOPIX index lost 1.8 percent to 1,516.76.

Mizuho Financial Group lost 6 percent to 618,000 yen, Sumitomo Mitsui Financial Group fell 5.2 percent to 778,000 yen, and Mitsubishi UFJ Financial Group Inc slid 3.9 percent to 1.0 million yen.

Aiful plunged 14 percent to 1,775 yen and Takefuji fell 7.9 percent to 2,505 yen.

Shares in both Sanyo Electric and Kyocera Corp slid after sources close to the matter told Reuters on Friday that Kyocera was entering the final stage of talks to buy Sanyo's loss-making mobile phone business, in a deal that would create the world's No.7 cellphone provider.

Sanyo shares were down 4.9 percent at 176 yen and those of Kyocera slid 2.6 percent to 10,510 yen.

REUTERS RC BST0630