Dec. 17 (Bloomberg) -- Japanese stocks fell, led by Mitsubishi UFJ Financial Group Inc., after Nomura Holdings Inc. said the country's three largest lenders were being asked to contribute too much to a subprime-asset bailout fund.

Mizuho Financial Group Inc. and Sumitomo Mitsui Financial Group Inc. paced the drop after the Nikkei newspaper said they will have to reply this week to a request by U.S. banks that the banks each provide a $5 billion credit line for the fund.

U.S. lenders including Citigroup Inc. are organizing a bailout fund to buy assets at structured investment vehicles, or SIVs, in an effort to prevent a fire sale as the vehicles' need for cash rises.

``For bank shareholders, this participation request is very unpalatable,'' said Tomokatsu Mori, who helps oversee $7.4 billion at Fukoku Capital Management Inc. in Tokyo. ``I don't see the logic as to why Japanese banks are being asked to save the financial system when they've had very little to do with the subprime problem. If they put in money once, there will be more requests in the future.''

The Nikkei 225 Stock Average declined 264.72, or 1.7 percent, to 15,249.79 as of the end of trading in Tokyo. The broader Topix index dropped 28.55, or 1.9 percent, to 1,472.70. Both measures fell for a fourth day.

Nippon Steel Corp. and Komatsu Ltd. led declines by steelmakers and machinery companies on concern the Chinese government will adopt policies that will slow growth in the world's fastest growing major economy.

Drugmakers Fall

Takeda Pharmaceutical Co. and Astellas Pharma Inc. dropped after the Nikkei said Japan's Health Ministry will reduce by more than 1 percent the amount of money it pays for drugs out of the national health plan, forcing drugmakers to reduce prices.

Mitsubishi UFJ, Japan's largest bank by market value, dropped 46 yen, or 4.3 percent, to 1,028 in Tokyo. Mizuho, the second-largest, fell 28,000 yen, or 5 percent, to 533,000. Sumitomo Mitsui Financial Group Inc. declined 32,000 yen, or 3.7 percent, to 825,000.

The requested contribution by the banks, amounting to 30 percent of the fund's total, is an ``excessive burden'' and weighs heavily on the stocks, Keisuke Moriyama, a Tokyo-based analyst at Nomura wrote in a report today.

Nippon Steel, the world's second-largest steel producer, fell 23 yen, or 3.7 percent, to 605, its biggest drop since Nov. 21. Komatsu, the world's second-largest maker of construction machinery, slumped 110 yen, or 3.5 percent, to 3,060, declining the most since Dec. 4.

China Concerns

JFE Holdings Inc., the world's third-largest steelmaker, dropped 250 yen, or 4.6 percent, to 5,180. Nisshin Steel Corp. declined 15 yen, or 3.9 percent, to 369.

China is likely to levy a property tax on a trial basis next year, the Beijing News Today reported. Separately, Wu Xiaoling, the People's Bank of China's deputy governor, called for controls on inflation with tighter monetary policies, according to report in the Shanghai Securities News today.

The central bank on Dec. 8 ordered commercial lenders to increase reserves by 1 percentage point, the most in four years, to try to prevent the world's fastest-growing major economy from overheating. Inflation accelerated at the fastest pace in 11 years, said the statistics bureau last week.

``Policies that restrict economic growth in China are a negative for the global economy, especially as the world is more dependent on the country amid the slowdown in the U.S.,'' said Naoki Fujiwara, who helps oversee $3.2 billion as chief fund manager at Shinkin Asset Management Co. in Tokyo.

Millea, Nomura

Takeda, Japan's largest drugmaker, declined 120 yen, or 1.8 percent, to 6,610. Astellas, Japan's second-largest drugmaker, fell 90 yen, or 1.8 percent, to 4,890. Daiichi Sankyo Co., Japan's third-largest drugmaker, dropped 50 yen, or 1.4 percent, to 3,480.

Millea Holdings Inc., Japan's largest insurer, added 40 yen, or 1.1 percent, to 3,630, after the company said its subsidiary Tokio Marine & Nichido Fire Insurance Co. will buy Lloyd's of London insurer Kiln Ltd. for 106 billion yen ($936 million) in cash.

Nippon Oil Corp., Japan's biggest refiner, jumped 24 yen, or 2.7 percent, to 900, after the company said it acquired a stake in a Thai offshore oil field.

Nikkei futures expiring in March lost 2.1 percent to 15,240 in Osaka and dropped 1.8 percent to 15,270 in Singapore.

Astellas Pharma Inc. (4503 JT)
Daiichi Sankyo Co. (4568 JT)
JFE Holdings Inc. (5411 JT)
Komatsu Ltd. (6301 JT)
Millea Holdings Inc. (8766 JT)
Mitsubishi UFJ Financial Group Inc. (8306 JT)
Mizuho Financial Group Inc. (8411 JT)
Nippon Oil Corp. (5001 JT)
Nippon Steel Corp. (5401 JT)
Nisshin Steel Corp. (5407 JT)
Sumitomo Mitsui Financial Group Inc. (8316 JT)
Takeda Pharmaceutical Co. (4503 JT)

To contact the reporter on this story: Pavel Alpeyev in Tokyo at palpeyev@bloomberg.net.

Last Updated: December 17, 2007 01:46 EST