Nikkei falls as Canon, banks decline but Sony up

TOKYO, Oct 27 (Reuters) The Nikkei average declined nearly 0.6 percent on Friday as earnings from Canon Inc. failed to impress investors, while Mitsubishi UFJ Financial Group Inc. and other banks fell after weak consumer price data fueled concern Japan may not raise interest rates again this year.

Broader losses were limited by shares of Sony Corp., as investors bet that the company's bad news had been largely factored in after it reported a quarterly loss on Thursday.

''Canon's results ... were already factored in by the market. So it looks like there aren't any more factors to boost the stock,'' said Hiroyuki Fukunaga, chief strategist at the research division of Rakuten Securities.

Some investors also worried that lower-than-expected consumer price data for September was bad news for Japan's banks, as it could delay an interest rate increase.

Higher rates, while generally a negative for stocks, are a positive for lenders, who can charge more interest on loans.

''An interest rate rise does seem farther off,'' Rakuten's Fukunaga said.

The Nikkei slipped 99.75 points to 16,711.85. The broad TOPIX index was down 0.73 percent at 1,652.48.

Canon dropped 1.5 percent to 6,550 yen. The camera and office equipment giant posted a 15 percent rise in quarterly profit on strong sales of digital cameras and a weaker yen but disappointed some investors by not raising its outlook.

Mitsubishi UFJ Financial Group Inc., the world's largest bank by assets, fell 2 percent.

Japan's second-largest lender, Mizuho Financial Group Inc. T> , fell 1.8 percent.

Japanese core consumer prices rose 0.2 percent in September from a year earlier, lower than economists' consensus forecast of a 0.3 percent rise.

SONY GAINS Sony shares gained 1.9 percent. The company said on Thursday it swung to a quarterly loss due to the mounting costs of recalling millions of computer batteries.

''I think the market has fully factored in the negatives,'' said Katsuhiko Kodama, senior strategist at Toyo Securities. ''Investors believe that Sony has a chance to improve from here.'' Viewcompany Co. shot up 32 percent on the Jasdaq market for start-ups after Fast Retailing Co., the operator of the Uniqlo casual-wear chain, said on Thursday it would spend about .5 million to buy a 33.4 percent stake in the shoe retailer.

Shares of Toyota Motor Co. Ltd. ended the morning flat after hitting a record high for the fourth straight session. Investors briefly pushed Toyota to 7,150 yen as they again bet the world's most profitable auto maker would continue to post solid earnings.

SBI Holdings Inc. shares dropped 2.9 percent following media reports that tax authorities had accused the venture capital firm of hiding taxable income.

Trade volume stayed nearly unchanged, with 889 million shares changing hands, compared to 834 million shares on Thursday morning.

Declining shares beat advancers by a ratio of more than two to one.

REUTERS AB VV1012