Nikkei hits 4-½ year closing low as gloom spreads

*Nikkei loses 4.3 pct, lowest close since early 2004

*Nikkei, Topix fall 5 pct at one point

*Top bank MUFG has biggest one-day percent loss since 2003

*Rising economic gloom prompts dumping of shares (Adds dropped title of speaker in paragraph five)

By Elaine Lies

TOKYO, Oct 6 (Reuters) - Japan's Nikkei stock average sank to a four-and-a-half-year closing low on Monday after briefly dropping 5 percent as signs of growing global economic gloom spooked investors into dumping shares across the board. Financial stocks were hit hard, with top bank Mitsubishi UFJ Financial Group losing 9.2 percent, its biggest one-day loss in percentage terms since October 2003.

Exporters and high-tech shares also dragged the Nikkei lower, with exporters undermined as the safe-haven yen surged. The dollar fell more than 2 percent at one point to 102.98 yen , a four-month low. Especially hard hit were chip-linked stocks, with Tokyo Electron and Advantest Corp the top two drags on the benchmark share average.

"It's a black Monday," said Nagayuki Yamagishi, a strategist at Mitsubishi UFJ Securities, noting that markets were plunging despite Friday's passage by the U.S. House of Representatives of a $700 billion financial rescue plan.

"The whole global economy is weighing on the market. England's bad, Germany's in terrible shape -- you can clearly see a global recession emerging."

The Nikkei .N225 shed 465.05 points to 10,473.09, its lowest close since February 2004. It earlier hit an intraday low of 10,374.38 and fell 5 percent.

The broader Topix lost 4.7 percent after earlier falling more than 5 percent, closing at 999.05 in its lowest close since December 2003.

Market attention shifted from concern about whether the U.S. rescue proposal would pass to concern about how it will be carried out, with doubts growing about whether it would help. "There's still a sense that the financial crisis really isn't all over yet, and it's definitely spilling over into the rest of the economy," said Takashi Ushio, head of the investment strategy division at Marusan Securities.

"We're looking at a bad downward spiral."

EARNINGS FEARS

Others said concern about Japanese corporate earnings was starting to take a larger toll as results season approaches and a growing number of firms issue downward revisions.

Yoshinoya Holdings Co plunged more than 12 percent after the restaurant chain cut its net profit forecast for the year to February 2009 by 98 percent.

Yoshinoya, which specialises in "gyudon" rice bowls with beef, cut its net profit forecast for the year to February to 50 million yen after its earnings took a hit from the poor performance of its sushi chain unit, Kyotaru Co , which has been forced to close all of its family restaurants.

Yoshinoya lost 12.7 percent to 87,600 yen.

A similar casualty was J.Front Retailing Co , which fell 3.3 percent to 554 yen after a newspaper reported that the department store operator's annual operating profit is expected to fall 15 percent to about 34 billion yen, missing the company's forecast for 40 billion yen.

Few sectors were unscathed.

"Though technical factors suggest a rebound is not unrealistic at this point, it's hard to come up with a buying scenario. Foreigners are staying away, and individual investor sentiment is hurting," Marusan's Ushio said.

Banks were battered, with Mitsubishi UFJ losing 9.2 percent to 806 yen, its biggest one-day percentage loss in five years. No 2 bank Mizuho Financial Group shed 7.8 percent to 402,000 yen and No. 3 lender Sumitomo Mitsui Financial Group tumbled 3.4 percent to 606,000 yen. Tokyo Electron slid 9.1 percent to 3,990 yen, the biggest drag on the Nikkei by volume weight, with Canon slipping 4.2 percent and Kyocera shedding 2.6 percent.

One of the few bright spots was cosmetics maker Shiseido Co , which rose 3.5 percent to 2,485 yen after Mitsubishi UFJ Securities raised its rating to "2" from "3," saying that new high-end cosmetics products will likely help the firm's earnings recover in the second half.

Trade was active, with 2.6 billion shares changing hands compared to last week's daily average of 2.1 billion. Declining stocks outnumbered advancing ones by nearly 17 to one. (Reporting by Elaine Lies; Editing by Hugh Lawson)