* Nikkei has best month in 6 months, but flat on the quarter
* Late yen advance feeds investor dumping of shares
* Aug industrial output dips 0.3 pct vs forecast 1.1 pct rise
* Nintendo tumbles more than 9 pct
By Elaine Lies and Aiko Hayashi
TOKYO, Sept 30 (Reuters) - Japan's Nikkei average slid 2 percent on Thursday, hit by a late yen rise, but still booked its best monthly performance in six months, helped by hopes the central bank will ease policy further and that the yen's rapid advance could be curbed by more intervention by the authorities.
But the benchmark edged down 0.1 percent for the quarter, sharply lagging other major world indexes.
The yen advanced against the euro, and against the dollar as well, after Ireland's central bank but a 34 billion euro ($46 billion) price on bailing out Anglo Irish Bank under a worst case scenario and said Allied Irish Banks needs to raise an additional 3 billion euros by the end of the year.
Market players said investors began dumping shares in late trade after expected window-dressing -- or buying of some of the quarter's better performers by fund managers to improve their books -- failed to emerge, with the yen rise also feeding sales.
"I think the next quarter will likely see the market testing the downside in a tug-of-war between hopes for policy easing and the worsening world economy," said Yutaka Miura, senior technical adviser at Mizuho Securities.
"The Nikkei could break below 9,000 over the next month or two, with the upcoming first-half results likely seeing some downward revisions mainly on the stronger yen."
The benchmark Nikkei fell 190.03 points to 9,369.35, the day's low, but still managed to post a 6.2 percent gain for the month of September, its best monthly rise since March.
The broader Topix fell 2.1 percent to 829.51.
Despite the monthly rise, persistent worries about the threat a strong yen poses to the fragile economic recovery sent the Nikkei down 0.1 percent for the July-September quarter. The MSCI index of Asia Pacific stocks outside Japan shot up some 17 percent in the same period.
The euro lost 0.7 percent against the yen to 113.21 yen and the dollar fell 0.4 percent to 83.39 yen after earlier falling to its lowest level since Japan intervened to support the dollar on Sept. 15.
"News about the Irish banks has made a lot of investors nervous about European banks in general," said Hiroaki Kuramochi, chief equity marketing officer at Tokai Tokyo Securities.
"Investors are also worried about what could happen to the yen in case there isn't any intervention by the authorities soon."
Expectations grew that the Bank of Japan will discuss easing monetary policy further at a meeting next week after a poor December outlook in the central bank's "tankan" survey of business sentiment released on Wednesday.
WEAK OUTPUT
Data on Thursday also showed Japan's industrial output unexpectedly fell 0.3 percent in August in a sign the economy's recovery is losing momentum due in part to a slowdown in export growth, and market players said it weighed on investor confidence.
"The output data was pretty weak, with the outlooks for September and October also seen in negative territory. This is one factor making it harder for investors to keep picking up stocks," said Yumi Nishimura, deputy general manager at Daiwa Securities Capital Markets.
In a sign of what may lie ahead for the next quarter, Nintendo Co Ltd tumbled 9.3 percent to 20,860 yen after its announcement of a late launch of its new 3D-capable DS handheld game player, as well as weak sales of existing products and a firm yen, forced it to slash its full-year profit forecast by a third.
Mitsumi Electric, a maker of electric machinery parts for Nintendo, plunged 7.2 percent to 1,280 yen. Goldman Sachs lowered Mitsumi's operating profit forecast to 0 yen from 3 bln yen and revised its 12-month stock price estimate to 1,450 yen from 1,490 yen.
Inpex Corp slid 3.7 percent to 393,000 yen after the Nikkei business daily reported that Japan's top oil explorer had decided to withdraw from the Azadegan oil field development project in Iran due to pressure from the U.S. government.
Inpex said it had not made a decision on the matter and a spokesman said the firm would consult the Japanese government to decide on its future in the project.
Trade picked up, with 2.1 billion shares traded on the Tokyo exchange's first section, the highest since Sept. 15 -- when Japan intervened to weaken the yen.
Declining shares beat advancing ones by more than 9 to 1.