Nikkei falls, Sony drops 5 pct on earnings forecast

TOKYO, Apr 28 (Reuters) The Nikkei average fell 0.55 per cent on Friday as a rise in the yen dragged down some exporters, while Sony Corp. lost 5 percent following a disappointing earnings forecast.

Non-ferrous metal stocks, such as Sumitomo Metal Mining Co.

Ltd., also fell on declines in metal prices after China on Thursday hiked interest rates to cool its economy.

The Chinese news came after the market closed here.

''A strong yen had a negative effect on exporters as Honda's good earnings had boosted the auto sector among others,'' said Hiroaki Kuramochi, managing director at Bear Stearns (Japan).

''But stocks with prospects are gathering buying,'' he said.

Honda Motor Co. Ltd., Japan's third-biggest auto maker, had surged to a lifetime high of 8,570 yen on Thursday, a day after it more than doubled its quarterly profit and announced a stock split.

Stocks in favour included Canon Inc. which on Thursday raised its full-year forecast to above market expectations.

The Nikkei was down 94.18 points at 17,020.36 as of 0056 GMT.

The TOPIX index was down 0.5 percent at 1,720.68.

Full-year results and outlooks for the year through to March 2007 are due from Mitsubishi Corp., Nippon Steel Corp., NTT DoCoMo Inc., Japan Tobacco Inc., Nomura Holdings Inc., Toshiba Corp., Matsushita Electric Industrial Co. Ltd. and Mitsui Fudosan Co. Ltd., among others.

The dollar traded at around 114.30 yen in Tokyo, off a three-month low below 114 yen marked in New York on Thursday after Federal Reserve Chairman Ben Bernanke gave the clearest signal yet that the current campaign of raising interest rates may be coming to an end.

Sony, the most active issue by value, lost 5.1 percent to 5,720 yen. The electronics and entertainment conglomerate on Thursday forecast a surprisingly sharp fall in operating profit this business year because of start-up costs for PlayStation 3.

Honda was down 0.6 percent at 8,130 yen.

Sumitomo Mining was down 1.9 percent at 1,642 yen and another non-ferrous smelter Toho Zinc Co. Ltd. lost 3.5 percent to 1,090 yen.

But Canon was up 2.6 percent at 8,660 yen.

The market reacted little to figures released before the opening showing stronger industrial output than expected in March and a rise in Japan's core CPI in the past fiscal year for the first time in eight years, underlining widespread views that deflation in ending.

REUTERS AD RAI0705