Nikkei hits 3-yr closing low, economy fear bites deep

*Nikkei at three-year closing low, worst week in year

*Topix at lowest close since February 2004

*Automakers tumble on poor sales, growing economy fears

*Investors warily eye U.S. employment data (Adds stocks, details)

By Elaine Lies

TOKYO, Oct 3 (Reuters) - Japan's Nikkei average fell 1.9 percent to a three-year closing low on Friday for its worst week in more than a year, with growing fears about the global economy hitting high-tech firms, autos and exporters. Toyota Motor Co fell to a three-year low and Nissan Motor Co dropped to its lowest level in nearly seven years, after major car companies reported a 26 percent drop in overall U.S. sales for September as the crisis on Wall Street rocked consumer confidence.

"U.S. indicators have been getting quite bad, and the rate at which they're worsening has picked up," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management.

"Japan's economy isn't good, America isn't good, Europe isn't good. The next to be hit may be emerging economies -- and this will just increase worries for an export-dependent economy like Japan's."

The benchmark Nikkei .N225 shed 216.62 points to 10,938.14, its lowest close since May 2005. It lost 8 percent on the week, its worst weekly drop since August 2007.

The broader Topix lost 2.7 percent for its lowest close since February 2004, finishing at 1,047.97.

On Thursday, the Dow .DJI shed more than 3 percent as data showing the number of people filing for unemployment benefits hit a seven-year high painted a troubling picture, as did a report showing a steep drop in factory orders in August. [.N]

The U.S. Senate passed the government's $700 billion financial rescue plan after the House of Representatives rejected it in its original form. The House is expected to vote on the revised bill on Friday, but market participants said even its passage was unlikely to stave off economic fears.

"It's becoming obvious now that there is going to be quite a negative impact on the world economy even if this bill is passed," said Hiroaki Kuramochi, head of the equity division at Tokai Tokyo Securities. "We're seeing broad sales by European investors, including those like Toyota."

AUTOS TUMBLE, HIGH-TECH HIT

Among the worst hit shares were automakers, who have suffered all week.

Shares of Toyota fell 5.3 precent to 4,080 yen, taking its weekly losses to 14 percent this week. Honda Motor Co (7267.T: Quote, Profile, Research, Stock Buzz) fell 5.5 percent at 2,835 yen, its lowest close since mid-April, down 15 percent for the week.

Nissan lost 7 percent to 621 yen, bringing its losses for the week to 18 percent.

Toyota's European sales forecast for next year is no longer realistic, the automaker's regional head said on Thursday, adding that the figure is more likely to match last year's level given the slowdown in the overall market and global economy. High tech shares tumbled as well, with TDK Corp down 7.8 percent at 4,710 yen, making it the biggest drag on the Nikkei 225 by volume weight. Kyocera Corp slid 3.4 percent to 7,660 yen and industrial robot maker Fanuc Ltd fell 2.1 percent to 7,330 yen.

Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz) lost 4.2 percent to 3,840 yen and Nikon Corp (7731.T: Quote, Profile, Research, Stock Buzz) tumbled 10.2 percent to 2,060 yen.

"It's hard to imagine buying stocks right now aside from some retailers and drugs, that kind of defensive share. All the economy-sensitive stocks are just being sold and sold," said Osakabe. Fast Retailing Co surged 13.6 percent to 12,370 yen to become the top positive contributor to the Nikkei 225 after the firm said its Uniqlo casual apparel chain's same-store sales jumped 20.8 percent in September, thanks to strong sales of autumn items.

Aeon Co Ltd rose 3.3 percent to 1,098 yen, while Asahi Breweries Ltd rose 2 percent to 1,876 yen.

Trade picked up on the Tokyo exchange's first section, with 2.3 billion shares changing hands, compared with last week's daily average of 1.9 billion.

Declining stocks outpaced advancing ones by more than 4 to 1. (Reporting by Elaine Lies; Editing by Michael Watson)