Recasts with restructuring details and quotes, adds bullets

By Katya Golubkova and Yuka Obayashi

TOKYO, May 8 (Reuters) - JFE Holdings 5411.T, parent of Japan's second-biggest steel maker, said on Thursday it will invest 400 billion yen ($2.8 billion) overseas over the next three years to drive growth, while suspending a blast furnace in western Japan to cut costs.

Under its new mid-term business strategy, JFE plans to reduce domestic steel production capacity to 21 million metric tons by March 2028 from 26 million tons currently, citing continued weak demand at home and pressure on global markets from China's exports.

"The business environment is deteriorating faster than expected," President Yoshihisa Kitano told a news conference, pointing to the impact from China's overproduction and U.S. tariffs.

JFE's mid-term strategy focuses on rebuilding a leaner, stronger domestic production structure while accelerating growth through strategic overseas investments in high-potential markets, Kitano said.

As part of the plan, JFE will suspend a furnace at its Fukuyama plant in the 2027 fiscal year, in addition to the planned suspension of a Kurashiki furnace in the 2028 fiscal year, when a new large-scale electric arc furnace will be built.

These changes will reduce the number of JFE's blast furnaces to five from seven.

Its local production capacity could decline further to around 20 million tons over the long term, Kitano added, though he emphasized JFE's goal of expanding its global presence through investments in India, North America and the Middle East.

JFE wants to expand its key overseas partnerships with India's JSW Steel JSTL.NS and North America's Nucor Corp NUE.N, Kitano said, adding the overseas investment also covers the acquisition of raw material interests.

JFE targets a profit at its steel segment of 700 billion yen by fiscal 2035, up from 216 billion yen last year. However, it expects the steel business to remain challenging amid falling demand in Japan, rising exports from China and uncertainties for the global economy resulting from U.S. tariffs.

For the year ended March 31, JFE posted a 54% fall in net profit to 91.9 billion yen amid lower steel output, and projected an 18% decline in net profit for the current year.

The auto and construction machinery sectors - which account for a relatively high share of its exports to North America - face "a significant risk from U.S. tariffs", JFE said.

($1 = 143.9800 yen)

(Reporting by Katya Golubkova and Yuka Obayashi; Editing by Jacqueline Wong and Janane Venkatraman)

((jekaterina.golubkova@thomsonreuters.com;))