TOKYO, Nov 10 - Tokyo stocks extended morning falls in mid-afternoon trade on Monday as the weekend general election, in which Japan's ruling coalition had to settle for a reduced majority, surprised the market, with banks among the hardest hit. Analysts said many had expected Prime Minister Junichiro Koizumi's Liberal Democratic Party (LDP) to maintain the simple majority it had held on its own, keeping his reforms on course. But the LDP took 237 seats in parliament's 480-seat Lower House, against its previous 247, according to Japanese media, in a sign that the popular Koizumi's personal magic had faded. Koizumi seemed certain to remain at the government's helm, but domestic media were quick to predict that his reform agenda of reduced public spending, privatisation and cures for the nation's ailing banks, faced rough going. "The results are not so critical that Prime Minister Koizumi will have to change his reform policies. But the LDP's failure to secure a majority is a bit of a (negative) surprise, thus being followed by light selling," said Yoshihisa Okamoto, senior vice president at Fuji Investment Management. Among the hardest hit were major banks, which are usually vulnerable to any sign of a change in the government's banking policy. Mizuho Financial Group <8411.T>, the world's largest bank by assets, was down four percent at 240,000 yen and rival Sumitomo Mitsui Financial Group <8316.T> was down 5.12 percent at 500,000. The key Nikkei average <.N225> was down 105.48 points or 0.99 percent at 10,523.50 as of 0445 GMT, and the broader TOPIX index <.TOPX> slipped 0.89 percent to 1,035.89. On Friday, the Nikkei rose 0.73 percent and the TOPIX gained 0.93 percent. Investors, wary about the outlook for equities in general after Wall Street fell despite strong jobs data, also hastened to lock in profits from recent gainers, such as communications and steel firms. Key Japanese economic data are also due later this week, including gross domestic product figures for the July-September quarter.
If the numbers are worse than expected that could prove a dampener for the market, which surged to a 17-month high last month on expectations for a sustainable recovery. Softbank Corp <9984.T>, Japan's largest broadband Web access service provider, slid 4.82 percent to 5,130 yen, reflecting caution ahead of the company's earnings for the first half after the close. Hit by profit-taking, shares of Softbank have lost nearly 30 percent in the past three weeks alone. Nikon Corp <7731.T> plunged 8.83 percent to 1,560 yen after its profit warning on Friday caught investors off guard. The camera and semiconductor equipment maker cut its recurring profit outlook for the year to March by two-thirds to three billion yen ($27.45 million), hit by a higher yen and sluggish demand from chip makers and for conventional cameras. Still, investors showed a healthy appetite for those firms that surprised the market on the upside with strong results. Komatsu Ltd <6301.T>, for one, rose 3.44 percent to 661 yen, the most active issue by volume. Japan's largest maker of construction equipment said on Friday that its first-half net profit rose 400 percent on strong sales in Europe and the United States.//