Japan's Nikkei stock average fell 2.5 percent on Monday as exporters such as Sony Corp <6758.T> were hit by a stronger yen, while Panasonic Corp <6752.T> tumbled in the wake of a gloomy earnings forecast. Panasonic lost 7 percent after it forecast a bigger-than-expected annual loss following a record quarter of red ink battered by weak demand, price falls and restructuring costs.

But Chugai Pharmaceutical Co <4519.T> gained on expectations for strong sales of the Tamiflu flu drug after the number of cases of H1N1 flu virus climbed among Japanese who had not been abroad.

Given that world stocks have risen pretty sharply recently, a bit of a correction is inevitable, said Nagayuki Yamagishi, a strategist with Mitsubishi UFJ Securities.

A batch of U.S. economic reports on Friday reinforced hopes that the recession may be easing, but falling oil prices dragged down energy shares and the rest of Wall Street with them. <.N>

Oil fell nearly 4 percent on Friday as dealers became increasingly pessimistic about the outlook for global energy demand, though it was edging higher in Monday trade.

Market analysts said while the raft of recent encouraging indicators had heartened stock markets, more was needed to point them toward sustained gains.

Recent economic indicators show that the worsening of the economy appears to have stopped, but now we need to see signs of recovery or it'll be difficult for stocks to rise decisively, said Yoku Ihara, manager at the investment information department of Retela Crea Securities.

The benchmark Nikkei <.N225> lost 232.17 points to 9,032.85, while the broader Topix <.TOPX> fell 2.3 percent to 861.56.

Tech shares dragged the market lower, with Kyocera Corp <6971.T> falling 2.9 percent to 7,280 yen and industrial robot maker Fanuc <6954.T> losing 4 percent to 7,420 yen. TDK Corp <6762.T> lost 4.1 percent to 4,180 yen.

The dollar fell 0.4 percent against the yen to 94.83 yen, with the yen's perceived safety status again in focus after Wall Street put in a weak close late last week.

As a result, exporters were sold broadly. Investors fret about a stronger yen because it eats into earnings made abroad when repatriated.

Sony Corp <6758.T> lost 6 percent to 2,415 yen and Toyota Motor Corp <7203.T> fell 2.8 percent to 3,490 yen. Honda Motor Co <7267.T> fell 3.6 percent to 2,665 yen.

But Chugai, which distributes Tamiflu through its partnership with developer Roche, bucked the trend to rise 5.6 percent to 1,866 yen.

Fujibo Holdings <3104.T>, which makes medical masks, was untraded due to a glut of buy orders.

(Reporting by Elaine Lies; Editing by Edwina Gibbs)

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