TOKYO, Nov 2 (Reuters) Japanese stocks slid more than 2 percent on Friday to their lowest level in a week after Wall Street tumbled on renewed credit fears and weak financial stocks, while a stronger yen also pressured share prices.
Particularly hard hit were financial shares such as Mitsubishi UFJ Financial Group, which fell 5 percent, after downgrades of U.S. banking giants Citigroup and Bank of America.
''Japanese stocks are basically just following Wall Street lower, with concern set off by Citi weighing on financial shares,'' said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities Co.
Citigroup shares plunged nearly 7 percent, their biggest one-day drop in five years.
Strength in the yen left Japanese shares vulnerable, and exporters such as Canon Inc were sold.
But the yen's gains against the dollar appeared to have slowed slightly, which Yamagishi said might help stocks find their footing. The dollar was trading around 114.60 yen, off an overnight low of 114.50.
''It's possible that we've seen things fall as far as we will today,'' he said.
The fact that the Nikkei rose for two straight days through Thursday to close at a two-week high makes it vulnerable to selling, while thinning trade ahead of the weekend could contribute to volatility, market participants said.
The Standard&Poor's 500 Index saw its biggest percentage point drop since Aug. 9, the day French bank BNP Paribas spooked global markets by freezing three funds that had invested in U.S.
As of 0046 GMT the Nikkei was down by 1.95 percent, at 16,541.58, a loss of 328.82 points. It earlier touched a low of 16,520.40.
The broader TOPIX was down by 2.02 percent, or 33.17 points, at 1,602.61.
BANKS BATTERED Banks were among the hardest hit.
Mitsubishi UFJ was down 5 percent at 1,062 yen and Sumitomo Mitsui Financial Gorup also fell 5 percent, to 877,000 yen.
Mizuho Financial was close behind with a slide of 4.8 percent to 613,000 yen.
Exporters also were hit, with Sony Corp down 1.7 percent at 5,730 yen and Canon Inc down 2 percent at 5,840 yen. Automakers also suffered.
But there were some bright spots.
Shares of Konica Minolta Holdings Inc jumped 9 percent to 2,230 yen on its strong first-half results.
The company posted a 23 percent rise in half-yearly operating profit on robust sales of its multifunctional printers and flat TV components, and it raised its annual outlook to match market expectations.
Reuters BJR VP0652