* Nikkei, Topix on track for worst quarter since 2008
* Highly cyclical shippers, financials lead decline
* Wall St stocks battered as post-Fed disappointment sours mood
By Tomo Uetake
TOKYO, Dec 21 (Reuters) - Japanese shares suffered more losses on Friday, with major indexes sinking to fresh multi-month lows, as the threats of further hikes in U.S. borrowing costs and of a government shutdown raised concerns about the global economic outlook.
The benchmark Nikkei share average lost 1.8 percent to 20,029.30 by the midday break, after shedding a hefty 2.8 percent on Thursday. The index is heading for its worst quarter since 2008, with a loss of 17 percent so far.
The broader Topix ended the morning session at 1.480.60, down 2.4 percent. It has shed 22.5 percent from its January peak and sinking deeper into a bear market.
"Global investors have completely capitulated after there was no Powell put," said Yasuo Sakuma, chief investment officer at Libra Investments, referring to dashed hopes for more dovish comments from Federal Reserve Chairman Jerome Powell. The market had hoped the Fed would slow, or pause, rate hikes in 2019-20.
"I wouldn't be surprised if the Nikkei falls below the 20,000-mark. Investors are getting increasingly suspicious about the valuation. No one would wants to buy now until they get some idea of how bad the situation could get."
Signs that the U.S. bond yield curve could invert soon are keeping many investors from buying shares, especially cyclical stocks such as financials and shippers, he said.
Dollar/yen dropped to 110.815 overnight, to its weakest since early September, having lost nearly 2 percent against its Japanese peer this week, which put pressure on exporters.
Among them, Toyota Motors dropped 3.1 percent.
Other notable movers included Otsuka Kagu, which jumped after the Nikkei business daily reported the furnishing chain store group would partner with Beijing Easyhome.
Familymart Uny fell and Don Quijote fell 5.8 percent and 3.2 percent, respectively, after Familymart said the convenience store chain operator's tender offer for Don Quijote came well below target.
Nissan Motor Co shares fell 1.8 percent, but fared better than the broader market after news Japanese prosecutors re-arrested its ousted chairman Carlos Ghosn on fresh allegations of aggravated breach of trust. (Reporting by Tomo Uetake Editing by Jacqueline Wong)