Nikkei falls 6 percent to 26-year low

By Elaine Lies

TOKYO (Reuters) - Japan's Nikkei average slid 6.4 percent on Monday to its lowest close in 26 years, as the yen rose to batter exporters such as Toyota Motor Corp and banks tumbled on concerns they would need to beef up capital.

Gains in the yen came despite a G7 warning about excessive volatility in the currency -- a warning that the Japanese government had requested.

Pledges from Prime Minister Taro Aso for more steps to ease the strains on banks and strengthen rules on short-selling did little to ease the panic in the markets.

"We need something that surprises the market in a good way, perhaps something like the government intervening to sell yen," said Masayoshi Okamoto, head of dealing at Jujiya Securities.

"If we don't have something like this, today's low -- the 26-year low -- won't be significant at all."

In its fourth straight negative day, the Nikkei shed 486.18 points to close at 7,162.90, its lowest close since October 1982 -- when Ronald Reagan was the U.S. President and Sony Corp released the CD player.

At one point it fell as far as 7,141.27.

The benchmark has lost 36.4 percent so far this month and 53 percent this year.