* Nikkei drops 1.03 pct, pulls back from near 2-week highs
* Kobe Steel, Furakawa Elec slump on quarterly earnings
* Surge by banks stalls as rise in long-term yield stops
By Shinichi Saoshiro
TOKYO, Aug 2 (Reuters) - Japan's Nikkei share average on Thursday pulled back from the previous day's near two-week highs, as Chinese stocks fell sharply after an escalation in the Sino-U.S. trade war soured sentiment.
The Nikkei ended the day down 1.03 percent at 22,512.53.
The index's fall gathered pace after Chinese shares tumbled, with the trade war back in focus as U.S. President Donald Trump proposed a higher 25 percent tariff on $200 billion worth of Chinese imports.
"Japanese equities felt the impact from the slide in the broader Asian markets following President Trump's latest proposal," said Yoshinori Shigemi, global markets strategist at JP Morgan Asset Management.
"The domestic market retains enough strength to bounce back, but it is wary as there is the likelihood of President Trump following up his threats with actual action."
Shares of industrial machinery maker Komatsu Ltd, which gets hefty revenue from China, lost 3.66 percent.
Kobe Steel fell 9.6 percent after it reported a 55 percent drop in recurring profit in the April-June quarter as a data-tampering scandal that hit Japan's third largest steelmaker hurt profits.
And Furukawa Electric Co slumped nearly 10 percent after the maker of metal products, cables and optical fibres saw its net profit fall 51.6 percent to 3.31 billion yen in the April-June quarter.
The banking sub-sector, which rallied 2.8 percent on Wednesday as a spike in Japan's long-term interest rates improved profitability prospects for banks, slipped 0.59 percent as the rise in rates came to a halt.
Gainers included Konica Minolta Inc, which rose 3.66 percent after the printer and optical devices manufacturer revised up its operating profit forecast for the year through March 2019 to 62 billion yen ($555 million) from 60 billion yen.
The broader Topix fell 1 percent to 1,752.09.
All but one of Tokyo's sub-sectors ended in negative territory. ($1 = 111.6900 yen) (Reporting by Shinichi Saoshiro Editing by Joseph Radford and Richard Borsuk)