* Investors use minister's comments to book Monday's gains * China growth figures compound lingering global economic fears * Steel, machinery and shipping shares hit (Recasts, updates Nikkei level, market reaction) By Thomas Wilson TOKYO, Oct 21 (Reuters) - Japanese stocks fell on Tuesday, with the market latching on to comments from the welfare minister on the country's public pension fund as an excuse to take profits from outsized gains the previous day.

The Nikkei share index lost 2.0 percent, closing at 14,804.28 and erasing half of its 4.0 percent gains on Monday, made on bets the Government Pension Investment Fund (GPIF) will increase stock allocations sharply.

Over the weekend, media reported that the $1.2 trillion GPIF would likely raise its allocation for domestic stocks to about 25 percent, a bit more than market expectations of around 20 percent.

Minister Yasuhisa Shizoaki, responsible for the GPIF, said on Tuesday that he did not know anything about media reports, disappointing investors who had hoped he might confirm such reports.

Amid lingering worries over global economic growth, the market used Shiozaki's comments as an excuse to sell stocks.

"It certainly takes the shine off yesterday's 4 percent rally, which was on the back of the GPIF reallocation headline" said Gavin Parry, managing director of Parry International Trading in Hong Kong.

Adding to the sell-off in afternoon trade was data showing that China's economic growth in the third quarter fell to near a six-year low of 7.3 percent. [ID: nL3N0SF3SV] Despite being slightly better than expectations, the Chinese figures underscored the fragility of the global economy, and reinforced expectations that Beijing would need to unveil more stimulus measures to avert a sharper slowdown.

Market players also cited concerns at the spectre of deflation in the euro zone, uncertainty at the timing of the Federal Reserve's tapering, and the possible effects of Ebola on global trade as being a drag on growth.

Japanese shares sensitive to fluctuations in the world's second-biggest economy fell in reaction to the Chinese figures.

Japan Steel Works Ltd lost 6.5 percent, while the Tokyo Stock Exchange grouping of machinery shares shed 2.8 percent. Sea transport shares lost 1 percent.

The yen appreciated slightly against the dollar, rising to 106.37 yen, which hit exporters' shares. Toyota Motor Corp shares lost 1.6 percent, while Honda Motor Co Ltd skidded 1.5 percent.

The broader Topix fell 1.6 percent to 1205.36, while the new JPX-Nikkei Index 400 dropped 1.6 percent to 10,968.74.

(Reporting by Thomas Wilson; Editing by Alan Raybould and Jacqueline Wong)