* Pause in gains inevitable as earnings priced in - analysts
* JAL drops on report of bigger loss, KDDI falls on downgrade
By Elaine Lies
TOKYO, Oct 22 (Reuters) - Japan's Nikkei average fell 1.6 percent on Thursday, with stocks hit across the board after U.S. financial shares fell after a warning from a banking analyst and as wariness grew ahead of Japanese earnings. Japan Airlines Corp snapped this week's rising streak to drop 4 percent after a newspaper reported that the struggling carrier's net loss may balloon to as much as about $5.5 billion for the year ending in March.
"There's been a tendency this earnings period for U.S. shares to fall even if their results are fairly positive, and investors are worried the same thing may happen here," said Takashi Ushio, head of the investment strategy division at Marusan Securities. "Plus given worries about a stronger yen, some investors wonder if the second half might not be as good as this one. They want to sell while things are still good."
The benchmark Nikkei lost 165.01 points to 10,168.38, extending the morning's losses, while the broader Topix fell 1.7 percent to 898.32.
"The market lacks energy and there are few reasons to buy Japanese stocks, particularly because the new government's policies have yielded little results so far," said Hiroichi Nishi, general manager of equity marketing at Nikko Cordial Securities.
"But at the same time, falls should be limited as the global economy is on track for a recovery and as global stocks are on an upward trend. Investors also want to see how Japanese earnings will pan out."
Japan's earnings season will swing into full gear next week.
The Nikkei business daily reported that both Honda Motor Co and Toshiba Corp were likely to post a profit for the April-September first half.
The reported income figure for Honda would be below consensus estimates while those for Toshiba would beat them.
Honda shares edged down 0.4 percent, while Toshiba gained 0.2 percent.
JAL shares fell to 121 yen after climbing earlier this week on a sense they had been oversold during a tumble last week. The Yomiuri newspaper said the struggling carrier plans to book hefty restructuring charges.
KDDI fell 3.6 percent to 486,000 yen after Citigroup Global Markets Japan cut its rating on Japan's No. 2 phone operator to "hold/medium risk" from "buy/medium risk" and lowered its target price to 550,000 yen from 650,000 yen.
Analyst Hiroshi Yamashina said he saw little in the way of share price catalysts. (Additional reporting by Aiko Hayashi; Editing by Edwina Gibbs)