(Reuters) - The Nikkei stock average lost more than 2 percent on Thursday after the Federal Reserve cited significant risks to the U.S. economy, while Softbank Corp (9984.T) plunged to its lowest since July 2010 on a report it would lose exclusive rights to sell the iPhone in Japan.
Some strategists said selling could intensify after September 27, which is the last day for investors to buy many Japanese stocks and still get dividends on them for the April-September half year.
"Once the dividend-buying factor is no longer supporting the market next week, we could see a tough situation, and the Nikkei could break below 8,500," said Fumiyuki Nakanishi, a strategist at SMBC Friend Securities.
Market participants said Tokyo's losses were also due in part to domestic position adjustments ahead of the end of the April-September half-year this month, when investors often lock in profits.
But market players say attractive valuations still support the Tokyo market. The Nikkei has lost more than 15 percent since early July, when it last traded above 10,000, while the Standard & Poor's 500 Index markets/index?symbol=us%21spx">.SPX lost about 13 percent in the same period.
The Nikkei finance/markets/index?symbol=jp%21n225">.N225 ended down 2.1 percent at 8,560.26. It was trading below its 25-day moving average of 8,756, but remained above support at its September 14 low of 8,499.34, which was its lowest intraday level since March.
The broader Topix index .TOPX slipped 1.7 percent to 744.54.
Also weighing on Japanese shares on Thursday were reports from China that suggested the world's No. 2 economy may not be able to pick up the slack from flagging U.S. and European growth.
A preliminary survey showed China's manufacturing sector contracted for a third consecutive month in September, while separate indicator showed inflation picked up.
"The China data just adds to negative factors already on everyone's mind, such as U.S. economic worries, the yen's strength against the dollar and the euro, as well as Europe's debt problems and whether Greece will default," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.
The decline in the Nikkei was, however, more moderate than Wall Street, which slid 3 percent for its worst drop in a month after the Fed's announcement, with selling accelerating as volume spiked in the last hour of trading.
The Fed said there were significant risks to an already weak U.S. economy, including strains on global financial markets, even as it launched a new plan to lower long-term borrowing costs and bolster the battered housing market.
The U.S. central bank said it would sell $400 billion of short-term Treasury bonds to buy the same amount of longer-term U.S. government debt.
Shares of Softbank, which has long been the sole provider of Apple Inc's (AAPL.O) iPhone in Japan, plunged 12.3 percent to 2,282 yen. It earlier sank as low as 2,271 yen, its lowest point in 14 months, on a report that rival KDDI Corp (9433.T) will start selling the iPhone 5 in November.
KDDI initially rose, but then gains unraveled and its shares fell 0.8 percent to 624,000 yen. Softbank and KDDI were the heaviest-traded shares by turnover.
Financial shares fell after a slide in their U.S. counterparts, after Moody's Investors Service lowered debt ratings for Bank of America Corp (BAC.N), Citigroup Inc (C.N) and Wells Fargo & Co (WFC.N) on Wednesday, saying the U.S. government is getting less comfortable with bailing out large troubled lenders.
Sumitomo Mitsui Financial Group (8316.T), the fifth-most traded issue by turnover, fell 1.8 percent to 2,089 yen, while Mitsubishi UFJ Financial Group (8306.T) shed 1.5 percent to 332 yen. Nomura Holdings (8604.T) lost 4.8 percent to 281 yen.
Volume was slightly below recent daily averages, with about 1.70 billion shares trading on the Tokyo Stock Exchange's main board. That fell short of last week's average of 1.75 billion shares, but topped Wednesday's volume of about 1.44 billion.