*Nikkei down 1.4 pct, hits lowest point in over 3 years
*Fears about global economy hurt investor confidence
*Automakers, exporters skid on economy worries (Adds stocks, details)
By Aiko Hayashi
TOKYO, Oct 3 (Reuters) - Japan's Nikkei average fell 1.4 percent on Friday to hit its lowest point in more than three years on fears that the global economy will worsen even if the U.S. Congress passes a $700 billion bank rescue bill.
Automakers such as Toyota Motor <7203.T> continued their slide after major car companies reported a 26-percent drop in overall U.S. sales for September as the crisis on Wall Street rocked consumer confidence. [ID:nN01506733]
"With the U.S. auto sales down about 30 percent, it's become clear that financial problems are finally spreading to the real economy," said Takahiko Murai, general manager of equities at Nozomi Securities.
"That is leading to a sell-off in stocks sensitive to the health of the economy."
The benchmark Nikkei <.N225> shed 157.78 points to end the morning session at 10,996.98, hitting the lowest level since May 2005.
The broader Topix <.TOPX> declined 2.3 percent to 1,051.88. It earlier fell to the lowest level since February 2004.
On Thursday, the Dow <.DJI> shed more than 3 percent as data showing the number of people filing for unemployment benefits hit a seven-year high painted a troubling picture, as did a report showing a steep drop in factory orders in August. [.N]
The U.S. Senate passed the government's financial rescue plan after the House of Representatives rejected it in its original form. The House is expected to vote on the revised bill on Friday.
"Investors expect the U.S. House to approve the bailout, but even if that happens, it would have a neutral impact on the market as its effectiveness is still questionable," said Murai at Nozomi Securities.
Yoku Ihara, manager of the investment information department at Retela Crea Securities, said the result of the House vote will still likely affect the Tokyo market early next week, though the main focus will shift to upcoming earnings by U.S. financial firms.
"If earnings by companies such as (Citigroup) turn out to be relatively good, investors might start picking up some of the battered financial stocks," he said.
AUTOS HIT
Shares of Toyota hit a three-year low while other car makers also extended losses following U.S. sales data on Wednesday.
Shares of Toyota fell 6 precent to 4,050 yen, extending a 3.4 percent drop on Thursday.
Shares of Honda Motor Co <7267.T> were down 4.5 percent at 2,865 yen after earlier sliding to 2,845, their lowest since mid-April. Honda and Toyota were the main stocks dragging down the Nikkei 225.
Nissan Motor Co <7201.T> dropped 5.8 percent to 629 yen, to trade at its lowest levels in nearly 7 years.
Separately, Toyota's European sales forecast for next year is no longer realistic, the automaker's regional head said on Thursday, adding that the figure is more likely to match last year's level given the slowdown in the overall market and global economy. [ID:nT278808]
High-tech exporters also fell, with Canon Inc <7751.T> sliding 3.2 percent to 3,880 yen and Kyocera Corp <6971.T> falling 2.1 percent to 7,760 yen.
Among gainers, Fast Retailing Co <9983.T> surged 12.8 percent to 12,280 yen to become the top positive contributor to the Nikkei 225 after the firm said its Uniqlo casual apparel chain's same-store sales jumped 20.8 percent in September, thanks to strong sales of autumn items.
Softbank Corp <9984.T> jumped 3.6 percent to 1,352 yen after Nikko Citi lifted its rating to "buy/speculative" from "hold/speculative", saying the telecom firm's shares are undervalued.
Trade picked up on the Tokyo exchange's first section, with 1.1 billion shares changing hands, compared with last week's morning average of 854 million.
Declining stocks outpaced advancing ones by nearly 5 to 1. (Reporting by Aiko Hayashi; editing by Sophie Hardach)