Autos drag Japanese shares lower after Trump tariff threat, banks' gains cap losses

TOKYO, Feb 19 (Reuters) - Japanese shares slipped on Wednesday, dragged by a decline in vehicle manufacturers after U.S. President Donald Trump's auto tariff threat, while a rise in banks on bets for Bank of Japan's (BOJ) interest rate hike capped losses.

The Nikkei share average .N225 fell 0.41% at 39,108.88 by the morning break.

"The Nikkei opened lower as remarks about tariffs on cars weighed on sentiment," said Shuutarou Yasuda, a market analyst at Tokai Tokyo Intelligence Laboratory.

Trump said on Tuesday he intended to impose auto tariffs "in the neighbourhood of 25%" and similar duties on semiconductors and pharmaceutical imports, the latest in a series of measures threatening to upend international trade.

The auto index .ITEQP.T slipped 1.5%.

Toyota 7203.T dropped 1.93%, pushing the broader Topix .TOPX down 0.41% to 2,764,01.

Honda 7267.T and Nissan 7201.T shed 2.29% and 1.8%, respectively.

Bank shares rose, with Mitsubishi UFJ Financial Group 8306.T hititng a record high before ending the morning session up 0.02%, while Sumitomo Mitsui Financial Group 8316.T rose 2.23% to become the biggest support for the Topix.

The banking index .IBNKS.T jumped 0.79%.

BOJ board member Hajime Takata said that the Japanese central bank must continue to raise rates gradually to avoid upside price risks from materialising.

"The BOJ is positive about raising rates at a time when other countries are cutting rates. That is not positive for Japanese stocks," Yasuda said.

The Nikkei dipped slightly below the 39,000 level soon after Takata began his speech, but recovered promptly.

Chip-related Tokyo Electron 8035.T and Advantest 6857.T rose 2.59% and 0.37%, respectively, to track the benchmark S&P 500, which squeaked past its previous record closing high. .N