* Nikkei falls 0.3%, Topix eases 0.1%; cyclicals lead losses
* Trump, Xi to hold trade talks in Japan on Saturday
* BOJ's "tankan" survey due out on Monday
By Tomo Uetake and Ayai Tomisawa
TOKYO, June 28 (Reuters) - Tokyo stocks fell on Friday as investors turned cautious ahead of much awaited talks between U.S. and Chinese leaders on the sidelines of the G20 summit in Japan, with cyclical shares retreating before the weekend.
The benchmark Nikkei average dropped 0.3% to 21,275.92 points, having risen 1.2% on Thursday after a South China Morning Post report raised hopes Washington and Beijing might make progress in talks.
For June, the Nikkei rose 3.3% for the first monthly gain since April, though it was almost flat for the week.
U.S. President Donald Trump said on Wednesday a trade deal with Chinese President Xi Jinping was possible this weekend but he is prepared to impose U.S. tariffs on most remaining Chinese imports if the two countries don't agree.
White House economic adviser Larry Kudlow told Fox News on Thursday that Trump's decision on whether to impose new tariffs on a $300 billion list of nearly all remaining Chinese imports will depend on the outcome of Saturday's meeting at the western Japanese city of Osaka.
Traders say investors unwound their positions in cyclical stocks ahead of the weekend and the Bank of Japan's closely watched "tankan" survey, due on Monday.
"Even if the two countries could reach a positive agreement, Japanese equities would benefit little. Expectations in the market are that the U.S. will ease their monetary policy, which would make the dollar pressured against the yen," said Isao Kubo, an equity strategist at Nissay Asset Management.
"Whether the yen strengthens or not is also of investor concern."
The yen's sustained strength against the dollar and weak Chinese stocks also weighed on sentiment.
Exporters, which led the gains the previous day, lost ground. Daikin Industries shed 2.4%, while Nissan Motors dropped 0.8% and Nikon Corp slipped 1.0%.
Bucking the overall weakness, some defensive shares were in demand. Tokyo Gas climbed 0.9%, while Astellas Pharma added 0.7% and Otsuka Holdings rose 0.5%.
The broader Topix eased 0.1% to 1,551.14. (Reporting by Tomo Uetake & Ayai Tomisawa; Editing by Kim Coghill & Shri Navaratnam)