Nikkei hits 1-mth low; KDDI, machinery stocks fall

TOKYO, July 23 (Reuters) Japan's Nikkei average fell to its lowest in nearly four weeks on Monday with exporters down after a fall in U.S. stocks, while mobile phone operators such as KDDI Corp.

declined on concern about further price competition.

Komatsu Ltd., Japan's top construction machinery maker, and other machinery shares also lost ground after disappointing results from industry leader Caterpillar Inc.

Norihiro Fujito, general manager of Mitsubishi UFJ Securities' investment research and information division, said investors were taking profits largely on concerns about the outlook for the U.S.

market.

''The U.S. market could turn more volatile on weakness in financial stocks due to subprime mortgage problems, as even relatively solid earnings results could spark a sell-off after shares there had risen on overly optimistic profit expectations,'' he said.

''But losses may be limited as foreigners are putting money into blue-chip stocks with high liquidity such as Mitsubishi Heavy Industries on profit hopes.'' Still, Fujito said the market is unlikely to see aggressive trade this week ahead of a Japanese election this weekend.

Half the seats in the upper house of Japan's parliament are up for grabs in the July 29 poll, with the ruling Liberal Democratic Party seen faring poorly after funding scandals and voter anger over lost pension records.

The benchmark Nikkei average finished the morning down 1.28 percent, or 233.31 points, at 17,924.62, after hitting its lowest since June 28.

The broader TOPIX index declined 1.42 percent to 1,751.02.

Trade volume was almost in line with last week's morning average, with 1.1 billion shares changing hands. Declining shares outpaced advancing ones by a ratio of nearly eight to one.

KDDI, MACHINERY SHARES DOWN Mobile phone operators KDDI, Softbank Corp. and NTT DoCoMo Inc.

fell after KDDI and Softbank said they would halve basic fees for some users starting in September.

Shares of KDDI dropped 4.1 percent to 818,000 yen, whileSoftbank lost 2.3 percent to 2,605 yen and DoCoMo declined 2.8 percent to 176,000 yen.

Shares of exporters fell, with Canon down 1.5 percent at 7,090 yen, while Honda Motor Co. Ltd. declined 2 percent to 4,460 yen.

Komatsu fell 1.8 percent to 3,920 yen after rival Caterpillar announced on Friday that its quarterly earnings fell more than expected because of lower truck engine sales, weakness in North American construction markets and higher production costs.

Shares in smaller rival Hitachi Construction Machinery Co.

were down 1.4 percent at 4,970 yen, while farm equipment maker Kubota Corp. fell 1.6 percent to 1,086 yen.

Elsewhere, shares of Sanyo Shinpan Co. tumbled 9.4 percent to 3,190 yen after the Nikkei business daily said the consumer lender would likely post an 80 billion yen net loss for the year to March after boosting reserves for legal claims.

Among gainers, shares of Japan Steel Works Ltd. gained 3.8 percent to 2,020 yen after the Nikkei business daily said on Sunday the company would ask Tokyo Electric Power Co. and other business partners to buy stakes in it in an attempt to protect against a hostile takeover.

Mitsubishi Heavy added 2.3 percent to 875 yen.

REUTERS SKB ND0912