* Nikkei sheds further 0.9 pct after worst day in 5 mths * Automakers, financials suffer * Correction seen short-lived -strategists By Dominic Lau TOKYO, April 5 (Reuters) - Japan's Nikkei average extended heavy losses made the previous day to fall to a four-week low on Thursday, hurt by a weak Spanish debt auction and fading hopes for further U.S. monetary stimulus. Automakers and financials were under pressure, with Toyota Motor Corp down 2.4 percent, Honda Motor Co shedding 3.1 percent, Japan's top investment bank Nomura Holdings losing 1.7 percent and insurer Dai-ichi Life Insurance Co Ltd off 3.3 percent. By the midday break, the Nikkei had dropped 0.9 percent to 9,727.99, on track for its third-straight losing day after sliding 2.3 percent on Wednesday, its worst day in five months. But it is still up 15 percent this year, buoyed by a run of strong U.S. economic data and liquidity boosting programmes by central banks, and strategists said they expect the current correction to be short-lived. "The market does not feel so overbought anymore. It is not expensive. It's just that people who don't have a whole load of experience of markets that go up because they have been in Japan start to feel vertigo when they get on the bottom of the step ladder," said Nicholas Smith, Japan strategist at CLSA. The Topix carried a 12-month forward price-to-book ratio of 1.03, a level not seen since mid-March last year and compared with a 10-year average of 1.33, data from Thomson Reuters Datastream showed. By contrast, the U.S. S&P 500 had a 12-month forward P/B of 2, more expensive than the Topix, which was down 1 percent at 827.13 on Thursday. Naomi Fink, Japan equity strategist at Jefferies, said a bear market relapse was not in the offing. "We remain positive mid-term, and don't anticipate a full-scale flare-up of the Greek crisis, another natural disaster in Japan or a hard landing in China," she said in a note. "Timing-wise, we may be left hanging until the Bank of Japan speaks (dovishly) again." The BOJ will hold a two-day policy meeting next week. BOJ EYED Fink recommended investors avoid shorting stocks that retail investors like to buy on dips, such as pharmaceuticals, retailers, information and communications companies, and food and beverage firms. A trader said the BOJ was expected to stand pat next week but was likely to expand its asset purchasing programme by 5 trillion yen ($60.64 billion) and extend the maturity of its Japanese government bond buying at its April 27 meeting. Ahead of the policy meeting, he said investors can buy short-dated Nikkei call spreads expiring in April or May as a cheap way to capture any upside. Trading volume on the main board after the morning session was slightly above half of its full daily average for the past 90 days. Kansai Electric Power Co Inc outperformed the broader market, up 3.1 percent after a report that Japan's trade minister is set to seek local approval for the restart of the utility's Ohi nuclear plant as early as Sunday. On Wednesday, Spanish borrowing costs jumped at a bond auction, raising fears that the euro zone debt crisis may flare up again and suggesting that the effects of a liquidity injection that has bolstered risk assets so far this year may be waning. Euro zone fears and the Federal Reserve's indication that it is less inclined to provide additional stimulus knocked U.S.

stocks, with both the Dow Jones industrial average and S&P 500 down 1 percent.