TOKYO (Reuters) - Japan's Nikkei share average slid closer to its year-to-date low early on Wednesday after disappointing U.S. earnings reflected weakening demand in Europe, while hints of more stimulus from the U.S. Fed failed to soothe fears of a global slowdown.
Toshiba Corp (6502.T) slumped 8 percent to a more-than-three-year low after sales of Apple's (AAPL.O) iPhones came in well below market expectations, a day after Toshiba said it planned to cut memory chip production by 30 percent due to oversupply.
The Nikkei lost 1.4 percent to 8,369.01 in early trade, striking a seven-week low and nudging closer to its June 4 low of 8,295.63. The broader Topix .TOPX lost 1.3 percent to 708.29.
Fears of a bailout for Spain hurt global markets, but U.S. equities were given a last-minute leg-up after the Wall Street Journal said Federal Reserve officials were moving closer to steps to spur activity and hiring.
The news was cold comfort for investors in the Japanese market, however.
"The problem is that if they were to introduce QE3 (a third round of quantitative easing) that would weaken the dollar, thereby strengthening the yen, which is a bad thing for Japanese stocks," said Makoto Kikuchi, CEO of Myojo Asset Management.
An irrepressibly robust yen has injured the share prices of Japanese exporters, who risk seeing their revenues pruned as the euro hovers at an 11-year low against the Japanese currency after Spanish and Italian bond yields soared to unsustainable levels early this week.
Canon Inc (7751.T), a camera maker with high exposure to Europe due to report earnings later on Wednesday, lost 1.8 percent to hit a fresh 3-year low. Rival Nikon Corp (7731.T) shed 4.7 percent to strike a 7-week low as the euro wallowed at 94.22 yen.
Euro zone concerns will be exacerbated by rating agency Moody's decision to change its outlook for Germany, the Netherlands and Luxembourg to negative from stable as the fallout from Europe's weaker southern nations cast a shadow on the region's most robust economies.
"It's a message that if you share a monetary union with broken economies like Spain's and Italy's then you will be dragged down too," Kikuchi said. "The uncertainty about when and how Germany will confront the decision of whether to leave the euro is breeding a risk-off atmosphere right now."
Apple AAPl.O suppliers were under pressure, with Murata Manufacturing Co Ltd 6981.OS, Foster Electric Co Ltd (6794.T), Ibiden Co Ltd (4062.T), Seiko Epson Corp (6724.T), Taiyo Yuden Co Ltd (6976.T) were down between 2.9 and 7.3 percent.
"I think that although individual stocks will be affected by earnings it's unlikely to lend any support to the wider market. Things have become quite tough," said Kenichi Hirano, operating officer of Tachibana Securities.
An increasing number of market analysts see the Nikkei slipping until it hits support around 8,100. It is down 4 percent on the week so far, after fears of a Spanish bailout were sparked by heavily indebted region Valencia asking Madrid for aid last Friday.
Editing by Richard Pullin