Trade war fears, stronger yen topple Japanese shares to 2-month lows

* Prolonged US-China trade war seen as drag on global growth
* Stronger yen saps exporters
* Dismal Q1 earnings send Kobe Steel, Sysmex sharply lower
* More earnings coming up; Mitsubishi Heavy on Mon, SBG on
Wed

By Tomo Uetake
TOKYO, Aug 5 (Reuters) - Japanese shares tumbled on Monday,
as investors grew nervous about a prolonged U.S.-China trade
war, with a rapidly strengthening yen dragging down exporters
like Panasonic and Daikin.
The Nikkei share average .N225 shed 1.7%, extending
Friday's sizable loss of 2.1%, to 20,720.29 for its lowest
finish since June 5. Of Tokyo's 33 subindexes, 32 industry
groups were in the red.
The grim mood followed declines on Wall Street on Friday
with the blue chip Dow .DJI and the S&P 500 .SPX hitting
their lowest levels since late June. .N
U.S. President Donald Trump abruptly decided on Thursday to
slap a 10% tariff on $300 billion of Chinese imports, stunning
markets and ending a month-long trade truce. China has vowed to
fight back on Friday. The rapidly strengthened yen during Asian trading also
soured sentiment and dragged down exporters, with Nissan
7201.T dropping 4.3%, Panasonic 6752.T down 3.7% and Daikin
Industries 6367.T slipping 3.1%.
On the currency market, the yen gained as much as 0.8% to
105.785 yen to the dollar, after the Chinese yuan weakened
beyond the psychological 7-per-dollar threshold to a record low
in offshore trading CNH=D3 . FRX All else being equal, a
stronger yen hurts Japanese exporters' profits.
"With the yuan's depreciation sparking fears of a currency
war, today we're seeing a full-fledged risk-off mood across
asset classes. The pace of the yen's appreciation looks quite
worrisome," said Yasuo Sakuma, chief investment officer at Libra
Investments.
"Some investors are seen selling futures to hedge their
positions in a declining market. When the trading volume is not
abundant, their actions drag down the market and cause more
selling."
With Japan's results season already in full swing, reactions
to earnings continued to dominate trading on Monday.
Kobe Steel 5406.T nosedived 15.2% to a seven-year low,
after the country's third-largest steelmaker cut its recurring
profit forecast for the financial year ending March by 67% as
the U.S.-China trade war battered steel demand for automobiles
and aluminium and copper demand for chips. Sysmex 6869.T tumbled 12.5% as the medical devices maker
reported weaker-than-expected profits for the April-June
quarter. Yahoo Japan 4689.T slid 12.5% after the internet company's
operating profit fell 24%, below analyst estimates. Bucking the overall weakness, there were also some bright
spots on the earnings front.
Subaru 7270.T climbed 3.9% after the carmaker reported a
48% increase in first-quarter operating profit, thanks to upbeat
global sales, led by strong SUV sales in the United States.
Asics 7936.T soared 23.9% after the sports gear maker
reported better-than-expected operating profit for the
January-June period and announced a commemorative dividend to
celebrate the firm's 70th anniversary. The broader Topix .TOPX lost 1.8% to 1,505.88, its loweset
closing in two months. Earlier in the session, the index hit the
weakest level in seven months.
Turnover on the Tokyo Stock Exchange's main board was
subdued at 2.52 trillion yen ($23.8 billion) versus the daily
average of 2.33 trillion yen over the past year.


($1 = 105.9100 yen)