Nikkei falls 0.72 pct, rise in oil prices weighs

TOKYO, Apr 17 (Reuters) The Nikkei average fell 0.72 per cent on Monday morning as alcoholic drinks maker Takara Holdings Inc. fell after it cut its earnings forecast and banks and brokerages extended recent falls.

A rise in crude oil to per barrel cast a shadow over the Tokyo market by stoking concerns that inflation fears in the United States may undermine Wall Street, where trading resumes on Monday after Friday's closure for the Easter holiday.

''Concerns about inflation in the U.S. could be fuelled by a rise in oil prices,'' said Yosuke Shimizu, head of Monex Inc's investment information centre.

''That's negative for U.S. stocks, possibly resulting in downward pressure on Japanese shares.'' Investors have been worried about inflation in the United States since oil cleared a barrel last week and benchmark U.S. Treasury bond yields jumped above 5 percent for the first time in almost four years.

A rise in U.S. bond yields helped lift those on 10-year Japanese government bonds (JGBs), with the benchmark yield rising to 1.98 percent on Friday, the highest since September 2000.

By midday the Nikkei was down 123.72 points at 17,110.10.

It has generally been falling since hitting 17,563.37 on April 7, its highest close since July 2000.

The TOPIX index was down 0.97 percent at 1,727.13.

Few market participants expect the Nikkei to fall far below 17,000 given optimism about corporate earnings reports, which get into full swing later this month.

Takara fell 4.3 percent to 714 yen after the company, which makes ''shochu'' distilled spirit and other drinks, said on Friday it has lowered its group profit forecasts for the year ended in March due to sluggish sales in the competitive soft drink market.

The yield of benchmark 10-year JGBs fell slightly on Monday, but selling continued of rate-sensitive stocks, such as ship builders, shipping companies and steel makers, said Kenichi Azuma, an equity strategist at Cosmo Securities.

''Some of the domestic plays have weaker balance sheets (when compared with those of high-tech and auto exporters), and are seen vulnerable to higher interest rates,'' he added.

Ship builder Hitachi Zosen Corp. was down 3.1 percent at 187 yen. Kawasaki Kisen Kaisha Ltd., Japan's third-biggest shipping firm, lost 2.4 percent to 681 yen.

A report in business daily Nihon Keizai on Monday said Kawasaki Kisen is likely to miss its profit forecast for the year ended March 31 due to rate reductions on European routes and surging fuel costs, dealing another blow to the stock.

The non-bank financial sector IFINS.fell 2.09 percent, with Aiful Corp. extending steep losses into a second session.

Japanese financial regulators on Friday ordered Aiful, the country's biggest consumer lending firm, to suspend business at all of its 1,700 outlets for three days as punishment for coercive loan collection methods.

Aiful was down 3.9 percent at 6,920 yen and rival Takefuji Corp. was down 2.7 percent at 7,350 yen.

Mizuho Financial Group Inc., Japan's second-biggest banking group and the most active issue by value, was down 1.7 percent at 983,000 yen.

Banks had been bought in the past few months due to expectations that a rise in interest rates would enable them to raise long-term lending rates and help the sector's earnings.

A market retreat hurt the brokerage sector, with No.1 brokerage Nomura Holdings Inc. falling 1.9 percent to 2,580 yen.

Trade was slow amid a lack of participation by foreign investors. The volume fell to 720 million shares, the lowest morning total since August 8, 2005.

Decliners outnumbered advancers 1,279 to 326.

REUTERS CS HS0913