* Banks lower on procurement cost concern
* Losses seen limited as weaker yen helps exporters
By Ayai Tomisawa
TOKYO, Jan 28 (Reuters) - The Nikkei average fell on Friday, hit by investor aversion to financial stocks after Standard & Poor's cut Japan's sovereign debt rating the previous day.
"Although a downgrade of government debt is not in itself a big surprise, it's triggering concerns about banks' rising fund procurement costs," said Masahiko Sato, executive director of product marketing department at Nomura Securities. "But as the downgrade is helping the yen to weaken, the impact should be limited to the stock market."
The yen nursed broad losses on Friday after S&P cut Japan's long-term debt rating by one notch to AA minus, saying the government lacked a coherent plan to tackle mounting debt.
"Some exporters are benefiting from a weaker yen to some extent, so losses are likely to be small," said Yumi Nishimura, a senior market analyst at Daiwa Securities Capital Markets.
"But although the short-term impact may be limited, this is a start of long-term uncertainty over a serious fiscal problem."
The S&P move matched an earlier ratings cut by Fitch and raised concerns about the risks of downgrades for other developed economies.
Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ Morgan Stanley Securities, said the rating downgrade could cause a turnaround in foreign investor's stance on Japanese stocks.
"The rating reflects the country's current fiscal position, therefore funds that have been overweight on Japan since last November may reconsider their positions on Japan."
Analysts said losses are expected to be limited on Friday thanks to strong corporate earnings results. But investors remain wary about Chinese stock market moves due to China's introduction of property taxes.
The benchmark Nikkei was down 0.8 percent at 10,395.05. It could move in a 10,350-10,500 range, analysts said.
The broader Topix fell 0.9 percent to 921.05.
Banks underperformed, with Mitsubishi UFJ Financial Group falling 2.7 percent to 434 yen, Mizuho Financial Group dropping 2.4 percent to 160 yen and Sumitomo Mitsuo Financial Group shedding 2.0 percent to 2,859 yen.
Komatsu Ltd jumped 3 percent to 2,520 yen after the construction machinery maker said on Thursday its group net profit in the nine months to Dec. 31 surged more than five times from a year earlier to 100.62 billion yen ($1.21 billion) on strong sales in China and other emerging markets.
It was the most actively traded stock by turnover on the Tokyo Stock Exchange's main board and the third-biggest gainer among the Nikkei 225 components.
Sony Corp gained 1.8 percent to 2,965 yen after it unveiled a new handheld gaming device and announced it would make PlayStation games available on other makers' hardware, as it battles with Nintendo's DS and tries to fend off competition from Apple Inc's iPhone. (Additional reporting by Takeshi Yoshiike and Antoni Slodkowski; Editing by Michael Watson)