By Chris Gallagher

TOKYO (Reuters) - Nearly four in 10 Japanese manufacturers say they may cut their annual earnings targets in the wake of Britain's decision to leave the European Union, fretting about the impact of a surge in the safe-haven yen, a Reuters poll showed.

Worries were particularly acute at major exporting industries with 61 percent of electronics firms and 57 percent of auto companies flagging the possibility of downward revisions.

Lower corporate profits would complicate Prime Minister Shinzo Abe's efforts to regalvanise a sputtering economy, as firms would have less scope for wage increases and capital investment - seen as key to ensuring a sustained recovery.

"More than Britain's exit from the EU, it's the accompanying strengthening of the yen that is tough on earnings," wrote a manager at an electrical machinery firm.

Almost all firms flagging possible downward revisions said they expected any cuts to be small rather than large, according to the Reuters Corporate Survey which was conducted July 1-15.

Even so, 63 percent of firms said they thought the government should intervene in the foreign-exchange market to weaken the yen, underscoring angst about the currency's strength.

Market expectations of intervention are, however, low as the yen's current strength has not been driven by factors specific to the currency and any action taken by Japan alone would likely be limited in effectiveness. Japan last intervened in 2011.

The survey, conducted monthly for Reuters by Nikkei Research, polled 534 big and medium-sized firms with managers responding on condition of anonymity. Around 260 companies answered questions on the impact of the Brexit decision.

Corporate Japan was also downbeat on the outlook for the domestic economy, with 62 percent of firms forecasting almost no growth while another 24 percent think there could be periods of economic contraction in upcoming quarters.

CURRENCY PAINS

Large Japanese manufacturers have on average forecast assumed a rate of 111 yen for the financial year to next March and are expecting a 12 percent decline in recurring profits, according to central bank data.

But those assumptions now look quite rosy.

The yen - seen as a safe haven during periods of risk aversion - strengthened in the run up to the June 23 Brexit vote - and then jumped to as high as 99 to the dollar in the immediate aftermath.

The currency later pulled back, trading between 102 and 106 during the survey period. It was trading at around 106 to the dollar on Thursday.

In the survey, 64 percent of all firms predicted the yen would on average trade at least 5 percent stronger than their assumed currency rates for the rest of the financial year.

"Overall concern regarding slower global growth could cause JPY appreciation, with a potentially negative impact on earnings indirectly if the yen appreciation sustains itself for a long period of time," said Naoki Kamiyama, chief strategist at Nikko Asset Management, who reviewed the survey results.

He added that those concerns could prompt firms to cut capital spending in the short-term.

The results of the survey come ahead of a slew of Japanese quarterly earnings next week including results from Canon Inc <7751.T>, Sony Corp <6758.T> and Nissan Motor Co <7201.T>.

Most firms are, however, reporting first-quarter earnings when revisions to profit outlooks are rare. Instead companies are expected to hold off until later in year before embarking on any downward cuts.

In contrast to hopes for foreign exchange intervention, 65 percent of respondents thought no further monetary easing was warranted - a sign of fading confidence in the effectiveness of policy action by the central bank.

The Bank of Japan has undertaken unprecedented easing since Abe took office three-and-a-half years ago but its adoption of negative interest rates this year failed to weaken the yen and has been widely panned.

(Reporting by Chris Gallagher; Editing by Edwina Gibbs)