Nikkei sags as exporters, banks battered by econ mood

* Nikkei slips 2.3 percent, grim economic mood weighs

* Bargain-hunting, pension fund buying provide support

* Banks hit in wake of Citigroup job cut news

* Softbank top drag on Nikkei after special loss risk report (Adds stocks, details)

By Elaine Lies

TOKYO, Nov 18 (Reuters) - Japan's Nikkei average slipped 2.3 percent on Tuesday, dragged down by worries about a weakening global economy that battered exporters such as Sony Corp (6758.T: Quote, Profile, Research, Stock Buzz), though bargain-hunting prevented further slides.

Softbank Corp (9984.T: Quote, Profile, Research, Stock Buzz) fell 15 percent to become the biggest drag on the Nikkei 225 after a newspaper said Japan's No.3 wireless carrier faces an increasing risk of a $776 million special loss from a financial derivative [ID:nT273622]. Bank shares slipped on growing worries about the financial sector in the wake of massive job cuts announced by Citigroup Inc (C.N: Quote, Profile, Research, Stock Buzz), with Mitsubishi UFJ Financial Group (8316.T: Quote, Profile, Research, Stock Buzz) down 6.7 percent ahead of its earnings announcement after the close. But bargain-hunting on dips and talk of buying by public pension funds for the second straight day kept shares from sliding across the board despite more gloomy pronouncements on the economy by policymakers. "There's no question that the economies of both the United States and Japan are doing poorly and will do worse, so the downside risk is quite high," said Toshihiko Murai, general manager of equities at Nozomi Securities.

"Whenever the Nikkei dips it appears that public pension funds have been emerging to buy. Without this buying, I think we'd probably be below 8,000 by now -- and if it stopped, the situation could become dangerous." With trade thin, the benchmark Nikkei .N225 shed 194.17 points to 8,328.41. The broader Topix .TOPX lost 1.8 percent to 835.44.

Japanese Economics Minister Kaoru Yosano said on Tuesday the economy may not grow in the fiscal year starting next April, issuing one of the bleakest comments yet on the impact of the economic downturn. [ID:nT27816]

Government data showed on Monday that Japan's economy has slipped into recession, confirming that the global financial crisis has sabotaged growth in yet another major economy, with the euro zone already in recession.

Adding to the gloom, U.S. Treasury Secretary Henry Paulson said on Monday that solid progress has been made in stabilising the U.S. financial system but it will take considerable time to restore it to help the economy to recover. [ID:nN17523718]

TAKING IN STRIDE

But some in the market were taking both the statements and the news that Citigroup is cutting 15 percent of its workforce in stride. "The market already knew what Yosano was saying, it's as if his knowledge finally caught up," said Hiroaki Osakabe, a fund manager at Chibagin Asset Management. "As for Citigroup, this was simply unavoidable -- and it's not as if they're alone, GM and other companies will have to do the same thing. The risk is that it underlines how poor the employment situation is, which then chills consumption."

Exporters were predictably battered by the growing gloom, with Sony down 4.1 percent to 2,005 yen and Canon Inc (7751.T: Quote, Profile, Research, Stock Buzz) losing 4.1 percent to 2,815 yen. Panasonic Corp (6752.T: Quote, Profile, Research, Stock Buzz) fell 3.4 percent to 1,438 yen.

Bank shares slid as well, with top lender Mitsubishi UFJ Financial Group (8306.T: Quote, Profile, Research, Stock Buzz), falling to 546 yen, while No. 2 bank Mizuho Financial Group (8411.T: Quote, Profile, Research, Stock Buzz) declined 4.3 percent to 229,800 yen and Sumitomo Mitsui Financial Group (8316.T: Quote, Profile, Research, Stock Buzz) fell 3.7 percent to 341,000 yen.

"Investors find it hard to invest in the financial sector unless signs emerge that the global economy has started to improve," said Kazuhiro Takahashi, a general manager at Daiwa Securities SMBC.

But not all the news was bad.

Mazda Motor Corp (7261.T: Quote, Profile, Research, Stock Buzz) was up 6.4 percent after the Nikkei business daily said Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz), which has a controlling 33.4 percent stake in the Japanese automaker, could announce plans to sell a 20 percent stake in the company as early as Tuesday.

Trading house Sumitomo Corp (8053.T: Quote, Profile, Research, Stock Buzz) rose 3 percent to 831 yen after Goldman Sachs upgraded the stock to "buy" from "neutral," citing its strong defensive characteristics amid falling prices in mineral resources. Trade was light on the Tokyo exchange's first section, with 1.95 billion shares changing hands, below last week's daily average of 2.11 billion.

Declining shares outpaced advancing ones, 846 to 745.

(Additional reporting by Rika Otsuka; editing Sophie Hardach)