* Steel sector weak as crude steel output falls
* Nikkei has risen 2.0 pct for the week
* Matsuya tumbles after cutting profit forecast
By Ayai Tomisawa
TOKYO, Sept 22 (Reuters) - Japan's Nikkei share average fell in choppy trade early on Friday, moving away from two-year highs as rising geopolitical tensions over North Korea sapped risk appetite.
South Korea's Yonhap news agency reported North Korean Foreign Minister Ri Yong Ho as saying he believes the North could consider a hydrogen bomb test on the Pacific Ocean of an unprecedented scale.
The report dented sentiment, erasing earlier gains in the market.
The Nikkei slipped 0.3 percent to 20,287.09 in midmorning trade, after opening in positive territory. For the week, the Nikkei is still up 2.0 percent.
"The headline about North Korea's nuclear test gave a little shock to the market," said Takuya Takahashi, a strategist at Daiwa Securities. "Though the market is not expecting that there will be an immediate military action, it has triggered a profit-taking opportunity since the Nikkei had risen sharply recently."
The Nikkei hit 20,481.27, its highest level since August 2015 on Thursday on the back of strong gains on Wall Street, a weakening yen and hopes for a snap election.
Steel shares eased on Friday after the Japan Iron and Steel Federation said the country's crude steel output fell 2 percent to 8.73 million tonnes in August from a year earlier due to glitches at some mills.
JFE Holdings fell 4.4 percent and Nippon Steel & Sumitomo Metal dropped 1.8 percent.
Exporters were mixed, with Advantest Corp falling 1.6 percent, Panasonic Corp shedding 1.0 percent, Suzuki Motor Corp declining 1.7 percent. Toyota Motor Corp rose 0.3 percent.
Department store operator Matsuya Co stumbled 3.8 percent after the company cut its net profit outlook to 250 million yen ($2.2 million) from a previous forecast of 400 million yen for the March-August period.
The broader Topix dropped 0.3 percent, while the JPX-Nikkei Index 400 shed 0.2 percent.
$1 = 112.1100 yen Editing by Richard Pullin