Japan stocks fell, sending the Nikkei 225 Stock Average briefly below 7,000 for the first time since 1982, led by banks after a drop in equity prices drove Mitsubishi UFJ Financial Group Inc. to replenish its depleted capital.

Mitsubishi UFJ, the nation's largest listed bank, slumped 15 percent on top a 15 percent drop yesterday after losses on equity holdings and a spending spree pushed the bank to sell new shares. Mitsubishi Estate Co. plunged the most in more than three decades on concern financing will dry up as banks scramble for capital. Canon Inc. declined 4.6 percent after forecasting a drop in profit on the surging yen and slower global growth.

``We are now in a selling panic which will eventually end, but some investors will suffer,'' said Edwin Merner, president of Atlantis Investment Research Corp. in Tokyo, whose parent company manages about $3.1 billion. ``There is probably no hurry to be rushing in, better to save some ammunition and buy very slowly and be very selective.''

The Nikkei 225 dropped for a fifth day, losing 67.76, or 1 percent, to 7,095.14 at the 11 a.m. break in Tokyo. The gauge rose by as much as 1.4 percent and falling to as low as 6,994.90. The broader Topix index fell 18.24, or 2.4 percent, to 728.22.

The Nikkei has lost 54 percent this year and is set for the lowest since Oct. 7, 1982. The Topix now trades at levels not seen since December 1983.

Mitsubishi UFJ dropped 15 percent to 495 yen, the lowest on record. The Japanese bank investing $9 billion in Morgan Stanley said yesterday it will sell as much as 990 billion yen ($10.7 billion) in new common and preferred shares to boost its capital.

Mizuho Financial Group Inc., the country's second-biggest listed bank, plunged 17 percent to 190,200 yen. Sumitomo Mitsui Financial Group Inc., the third biggest, was poised to fall by its daily limit of 50,000 yen to 335,000.

Property Plunge

Mitsubishi Estate, the nation's second-largest developer, retreated 18 percent to 1,409 yen, the biggest decline since at least 1974, the limit of Bloomberg pricing data. Sumitomo Realty & Development Co. tumbled 18 percent to 1,332 yen, also the biggest slide since at least 1974. The Topix Real Estate Index lost 16 percent, the worst performer among the benchmark's 33 industry groups and biggest slide since at least 1982.

Japan's real estate industry relied on cheap bank financing to drive gains in property prices during the previous four years. Banks have been cutting finance for developers amid the global financial crisis, forcing Urban Corp. and 16 other listed property-related companies into bankruptcy this year. Minoru Mori, chairman of Mori Building Co., Japan's biggest privately held developer, said yesterday residential property prices are headed for a ``full-blown'' drop.

Canon, Kao Earnings

Canon, the world's No. 1 digital-camera maker, slipped 4.6 percent to 2,265 yen. The company forecast its first profit drop in nine years as camera sales are expected to miss earlier estimates and the stronger yen is eroding profits. Nintendo Co., which depends on exports for more than two-thirds of its profit, dived 9.6 percent to 22,070 yen, the lowest in two years.

The yen rallied to as strong as 113.64 against the euro yesterday, the highest in almost seven years.

Kao Corp., Japan's largest maker of household and personal care products, advanced 6.6 percent to 2,895 yen after the company reported an 11 percent gain in first-half net income.

Nidec Corp., the world's biggest maker of motors for hard- disk drives, soared by its daily limit of 500 yen to 4,010 yen, the most in 15 months, after posting a record first-half profit. The company boosted growth through acquisitions in recent years and lifted net income for the six months ended Sept. 30 by 37 percent.