Japan stocks tumble amid global sell-off

TOKYO, Feb 28 (Reuters) Tokyo's broad TOPIX index dropped 3.6 percent on Wednesday, on track for its biggest one-day loss in nearly two years, as investors sold stocks across the board from Nippon Steel Corp. to Toyota Motor Corp. as part of a sell-off in markets around the world.

Shares of Nikko Cordial Corp. plunged 14.9 percent following a newspaper report that the brokerage was likely to be delisted due to an accounting scandal.

The market losses prompted the Tokyo stock exchange to limit arbitrage trade and briefly suspend trade of TOPIX futures.

''The market is getting calmer. But it does not mean that it will bounce back soon,'' said Zenshiro Mizuno, senior managing director at Marusan Securities Co. Ltd, adding that the benchmark Shanghai Composite Index was recovering and the U.S. economy will be in focus.

''U.S. durable goods data was not good and the key will be how the global stock market will factor in a possible economic turndown,'' he said.

The TOPIX slid 65.17 points to 1,746.16 as of 0453 GMT. If the TOPIX closes at this level, the index would book its biggest one-day percentage decline since April 2005. It earlier tumbled as low as 1,719.15.

The Nikkei was down 3.3 percent at 17,519.13, after earlier falling as low as 17,382.79.

Michael Coates, director of equity sales at KBC Financial Products, also said with the outlook for a global economic slowdown, investors may lose a chance to buy lagging exporters while domestic shares remain expensive.

''Some of the domestic issues had run up quite a bit, and what we need was a healthy sector rotation,'' he said. ''With a fear of a global economic turndown, there is not going to be a sector rotation into exporters.'' Nippon Steel shed 3.6 percent to 806 yen, after hitting its highest in more than 17 years on Tuesday.

Toyota Motor lost 4.2 percent to 7,990 yen.

Shares of Honda Motor Co. also dropped 4.7 percent making it the biggest contributor to the Nikkei average's 3.1 percent decline.

Automakers were hit by selling following a tumble in global stocks, with the yen holding near 10-week highs against the dollar.

A stronger yen usually hurts car makers because they make the bulk of their profits in overseas markets.

Another notable stock was Sanyo Electric Co. which dropped 4.8 percent to 179 yen after it said on Tuesday it is considering restating its parent-only earnings reports for the business years from 2000/01 to 2003/04.

REUTERS CS ND1208