Nikkei falls 1 pct, KDDI and Daihatsu slide

TOKYO, Apr 25 (Reuters) The Nikkei average dropped 0.99 percent on Wednesday as KDDI Corp. tumbled after concerns about the mobile phone operator's capital spending plans prompted a brokerage downgrade.

Daihatsu Motor Co. Ltd., the minivehicle unit of Toyota Motor Corp., extended its losses after projecting that its operating profit will fall in the year that started in April.

But shares of Canon Inc. rose 1.2 percent as the maker of office equipment and cameras posted a 22 percent rise in quarterly operating profit on Tuesday and raised its full-year forecast by 3 percent.

Conservative earnings outlooks have discouraged investors from pushing stock prices higher, but some market participants were worried that foreign investors have been selling Japanese stocks.

Orders for Japanese stocks placed through 13 foreign securities houses before the start of trade showed that they planned to sell a net 9.3 million shares on Wednesday, the seventh straight session of premarket selling.

''In the last three to four years, the Nikkei has risen from 7,600 to 17,000, and those who have had Japanese shares may be unloading some to take profits for now,'' said Takashi Matsumoto, senior strategist at Okasan Securities Co. Ltd. ''Besides, interest rates are on the rise in Japan and elections are coming up.'' The Nikkei was down 173.36 points at 17,278.41 as of 0420 GMT, while the broader TOPIX index fell 1.02 percent to 1,688.68.

KDDI fell 4.7 percent to 944,000 yen, becoming the biggest drag on the Nikkei's decline.

Merrill Lynch cut its rating on the stock to ''neutral'' from ''buy'', saying high capital spending may leave little room for increases in shareholder returns.

Morinaga and Co. Ltd. declined after the major confectionery maker cut its earnings estimate for the year ended March 31.

A weaker earnings outlook also sent Oji Paper Co. Ltd. down 2.4 percent to 616 yen.

Daihatsu Motor dropped 4.7 percent to 980 yen on lower profit forecast. Major auto stocks were also lower, hurt by a Goldman Sachs report on Tuesday that said guidance from Japanese auto makers was expected to be conservative, with some likely to announce forecasts of earnings declines depending on foreign exchange assumptions.

Nissan Motor Co. was down 2.8 percent at 1,194 yen. Toyota Motor Corp. fell 1.9 percent to 7,230 yen, while Honda Motor Co. , which releases its results later on Wednesday, was 2 percent lower at 3,990.

REUTERS PV PM1146