* Nikkei down 0.4 pct * Renesas continues to plummet, to outsource to Taiwan * Shippers sail forth on Credit Suisse upgrade * Worries about Spanish banks, bond yields dampen sentiment By Sophie Knight TOKYO, May 29 (Reuters) - Japan's Nikkei share average slipped in early trade on Tuesday as a surge in Spanish borrowing costs kept investors away from riskier assets. The Nikkei dipped 0.4 percent, while the broader Topix index slipped 0.3 percent in relatively thin trade. Volume was at 37 percent of its full daily average for the past 90 days at the midday break. "Yesterday and today trading volume has been very low, so it's really only short-covering, the market isn't moving on fundamentals," said Yasuo Sakuma, portfolio manager at Bayview Asset Management. "But the short ratio is very high now, so it's getting harder to sell some stocks off any more than they already have been." Troubled chipmaker Renesas Electronic was the biggest loser on the main board, plummeting 12.7 percent after it said on Monday it will outsource its top-end chips to Taiwan Semiconductor Manufacturing Co. The shares have lost half of their value this month alone as the company has asked for help to get out of the red. Panasonic Corp climbed 2 percent after the Nikkei business daily said it plans to cut 3,000-4,000 staff from its 7,000-strong workforce at its headquarters. "There were few new developments overnight to spur investors to move their positions today, so it's mainly about watching to see if battered blue-chips like Sony stop falling," said Masayuki Doshida, senior market analyst at Rakuten Securities. Sony Corp pared early gains to end down 0.1 percent by the midday break. It has lost 20 percent on the month after failing to convince investors that it can turn around its loss-making TV business. The Nikkei capped its eighth week of losses last week, its worst run in 20 years, as worries about the slow recovery of the global economy have been exacerbated by negative developments in the euro zone crisis and a strong yen. Investor sentiment was dealt another blow as Spanish 10-year bond yields jumped on Monday to their highest level since the European Central Bank injected cheap three-year loans into the banking system in November 2011. "At the moment investors are more worried about what Spain will do next than whether Greece will leave the euro or not," said Ryota Sakagami, chief strategist in equity research at SMBC Nikko Securities. "The markets aren't going to settle until they refinance the banks or introduce more quantitative easing." SHIPPERS SEAWORTHY The sea transport sector put on 2.4 percent as one of the few sectors in positive territory after Credit Suisse upgraded three shipping companies to "outperform" from "neutral" and hiked the target prices of two of them. Kawasaki Kisen Kaisha Ltd, Nippon Yusen KK and Mitsui OSK Limited Lines rose between 2.5 and 2.9 percent after the report was released, but Stefan Worrall, director of equity sales at Credit Suisse, said that the ratings reflected a long-term outlook and that the downside risk was prevalent in the short-term. "You don't need to do anything for three months because it's very volatile," he said. "It takes a long time to turn around a cargo carrier." Kintetsu World Express Inc, another cargo carrier that also deals in airfreight, advanced 4.3 percent after Morgan Stanley MUFG issued an upbeat note and hiked its target price to 3,500 yen from 3,300, maintaining its "overweight" rating.