August 21, 2018 / 2:56 AM / a month ago

CORRECTED-Nikkei drops as yen rises after Trump rate comment; U.S.-China talks eyed

(Corrects the timing of expected U.S.-China trade talks in the 6th paragraph)

* Investors on sidelines before U.S.-China trade talks

* Thin seasonal trade expected to continue - analysts

By Ayai Tomisawa

TOKYO, Aug 21 (Reuters) - Japan's Nikkei dropped on Tuesday morning as a stronger yen hurt risk sentiment, with cyclical stocks such as shippers, machinery stocks and automakers losing ground.

The Nikkei share average dropped 0.1 percent to 22,170.54 in midmorning trade. The broader Topix shed 0.3 percent to 1,687.87.

Declining issues outnumbered advancers 1,519 to 492.

The dollar dropped 0.18 percent to 109.87 yen, after falling below the psychologically-significant 110 yen level for the first time since June 28 after U.S. President Donald Trump criticized the Federal Reserve for raising interest rates.

Analysts said that the Japanese market is expecting thin summer trade again on Tuesday after Topix's volume and turnover hit the lowest since early April on Monday.

They added that investors' risk appetite is low amid uncertainty over the lower-level trade talks between the United States and China, which are expected to start mid-week.

"Investors are staying on the sidelines as we don't know what the outcome will be. The market could go in any direction after the talks," said Norihiro Fujito, chief investment strategist at Mitsubishi UFJ Morgan Stanley Securities.

Against a backdrop of global trade disputes, Trump said in an interview with Reuters on Monday that China was manipulating the yuan to make up for having to pay duties imposed by Washington on some imports from China.

Tuesday's notable losers include shippers, with Mitsui OSK Lines falling 1 percent and Kawasaki Kisen shedding 0.9 percent.

Electronics shares also lost ground, with Panasonic declining 2.0 percent, Alps Electric falling 2.7 percent and Taiyo Yuden declining 2.1 percent.

Subaru Corp dropped 0.9 percent and Mazda Motor shed 0.7 percent. (Reporting by Ayai Tomisawa Editing by Eric Meijer)

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