Tokyo loses ground on banks' weakness

Mizuho Holdings managing director Mitsuru Machida delivers the banking giant's profit result in Tokyo Friday

TOKYO, Japan -- Tokyo stocks were lower by midday Monday, led by sharp falls in Mizuho Holdings and other banking shares.

The benchmark Nikkei average fell 0.39 percent or 53.18 points to 13,712.74 at midday and the capital-weighted TOPIX index gave up 0.77 percent or 10.51 points to 1,349.47.

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Elsewhere in the region, markets in Korea, Australia, Hong Kong, Singapore and Taiwan also were down. Bangkok and Jakarta opened slightly stronger.

In Seoul, the Kospi lost 3.43 points to 620.68 by midday, while in Australia the S&P/ASX200 was off 4.2 points at 3421.9. Hong Kong's Hang Seng index was down 50 points at 13,695.50 just before midday.

Heavyweight Samsung Electronics was one of the few Korean stocks to gain ground, up 1000 won to 223,000 won.

In Australia, telco Telstra and leading banks NAB and CBA were stronger, but News Corp and resources giant BHP lost ground in the morning session.

In Tokyo, there are concerns over the Japanese financial sector's mountain of bad loans.

Bad debt overhang has 'trapped' market

"The bad debt overhang has this market trapped in a range. It flew on hopes for (Prime Minister Junichiro) Koizumi reforms, but has little chance of breaking out until he maps out a more concrete plan to clean up the mess," said Kazuyuki Naito, general manager of Sanwa Securities' equities sales and trading.

Mizuho Holdings Inc, the world's largest bank by assets, slid 5.51 percent to 634,000 yen following its earnings on Friday and after Credit Suisse First Boston (CSFB) issued a sell rating on the bank.

Japan's top eight banking groups, in unveiling earnings results last week, said outstanding problem loans edged up 1.5 percent to 17.95 trillion yen ($149 billion) at the end of March.

Traders said the sheer size of the number, although well flagged and thus largely factored in, was still a psychological blow to sentiment.

Isuzu Motors expected to slash jobs

UFJ Holdings Inc dipped 4.87 percent to 722,000 yen, while industry leader Mitsubishi Tokyo Financial Group shed 5.08 percent to 1.12 million.

Mizuho, created last year through a three-way banking merger, on Friday posted a 211.26 billion yen group net profit in the year ended March, despite taking loan loss charges of 693.85 billion yen-up sharply from its earlier estimate of 430 billion.

Mizuho is likely to have difficulties in competing with more adept foreign players in the wholesale banking business, said Walter Altherr, director of financial services research at CSFB, in explaining his bearish outlook on the bank.

Isuzu Motors Ltd jumped 4.66 percent to 292 yen after media reports said Japan's top maker of light trucks plans to slash 9,000 jobs over the next three years in a bid to cut costs.

The reported move to trim its 38,000-strong workforce by nearly 25 percent would be one of the most drastic restructuring efforts by a Japanese automaker.

The decision is expected to be announced later in the day when the company unveils its earnings.

Reuters contributed to this report.

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