* Nikkei down for six sessions in seven

* Chipmakers and industrials drag

* SoftBank, Z Holdings rise on U.S. spinoff plans

July 12 (Reuters) - Japanese shares were the worst performers in Asia on Wednesday, with the Nikkei sliding to a one-month low as a firmer yen applied brakes on a market rally, although the prospect of a potential SoftBank spinoff helped limit losses.

The Nikkei fell 1.3% to 31,791.71 in the morning, before recouping some losses to close 0.8% down at 31,943.93. The broader Topix fell 0.7% to 2,221.48.

The yen and stocks typically move in opposite directions, since a stronger currency hurts exporters' competitiveness and also makes stocks more expensive for foreigners.

The yen strengthened about 0.6% to 139.50 per dollar, and has gained nearly 4% in four trading days as a lot of short positions have been reversed.

The Nikkei lost more than 5% since hitting a three-decade high last week.

"Psychologically, the yen may be causing a little bit of nervousness," said Vishnu Varathan, head of economics at Mizuho Bank in Singapore.

"The hardwiring for markets is the inverse relationship between the yen and Nikkei."

The Nikkei's sharp rally this year - up 22% versus world stocks' 13% jump - has also drawn in a lot of foreign investors, who might be holding back on adding to positions while the cost in dollar terms goes up, he added.

Reuters reported that tech conglomerate SoftBank and its internet subsidiary Z Holdings are mulling a U.S. listing for its payments business, lifting their shares and limiting the losses in the benchmark index.

Shares of Z Holdings rose 5.6% and SoftBank gained 2.1%. Convenience-store operator Lawson was another standout gainer, jumping 16% after its first-quarter results beat expectations. Shares in rival Seven & I rose 2.9%.

Losses, meanwhile, were broad with industrials and technology being the largest drags in the Nikkei.

Pharmaceuticals maker Eisai was the top loser, down 4.1%, followed by semiconductor equipment maker Screen Holdings falling 3.7%.

Chipmaker Tokyo Electron fell 3.3% to extend a recent pullback. Shares of Renesas Electron, which doubled this year, dropped 3.6%.

(Reporting by Tom Westbrook; Editing by Rashmi Aich and Sherry Jacob-Phillips)