Japanese shares slide on worries over higher interest rates

"Some market players had taken (Tuesday’s) bounce in share prices as a sign that sentiment was turning bullish (positive) again but they’ve now realized the bias remains bearish (negative) and they moved to trim their positions," said Kenichi Hirano, a senior strategist at Tachibana Securities.

Share prices declined almost across the board.

Chip makers retreated, led by Elpida Memory, which was down 430 yen or 9.4 percent at 4,150 after the firm announced plans to issue up to 32.3 million new shares to fund an increase in production capacity, dealers said.

Among auto makers, Daihatsu plunged 47 yen or 4.5 percent to 999 while Isuzu lost 11 yen or 3.0 percent to 356. Fuji Heavy, which makes Subaru-brand vehicles, was down 17 yen or 2.5 percent at 656.

The high-tech sector suffered as Kyocera declined 260 yen or 2.9 percent to 8,540. Machinery maker Ebara lost 19 yen or 3.9 percent to 464 and Nippon Mining Holdings shed 35 yen or 3.6 percent to 930.

Bridgestone, Japan’s largest tire maker, declined 60 yen or 2.7 percent to 2,140 after it said it has cut its 2006 net profit forecast to 65 billion yen from 100 billion yen, blaming higher-than-expected raw material costs.

On the foreign exchange market, the dollar slipped to 116.18 yen in Tokyo afternoon trade from 116.26 in New York late Tuesday.

The euro inched down to 1.2577 dollars from 1.2582 and dropped to 146.06 yen from 146.31.