* SoftBank Group contributes hefty negative losses to Nikkei
* Some manufacturers gain after dropping sharply in May
* Casio Computer soars on share buyback announcement
By Ayai Tomisawa
TOKYO, June 4 (Reuters) - Japan's Nikkei fell on Tuesday morning as festering trade tensions and a stronger yen hurt sentiment while extended losses for index-heavy SoftBank Group added to the overall pressure on the market.
The Nikkei share average dropped 0.4% to 20,325.02 at the midday break, after opening a tad higher.
Escalating trade tensions between the United States and China have sapped investor risk appetite and rattled financial markets in the past month. In Japan, the Nikkei has lost nearly 9% since the beginning of May. Overnight, there was more downbeat news, with the Nasdaq sliding into correction mode as the index lost more than 10% from its May 3 closing record. U.S. factory activity also disappointed, with the U.S. Institute for Supply Management's gauge of manufacturing activity unexpectedly falling in May to the weakest level in more than 2-1/2 years amid global trade tensions.
"There are negative catalysts filled in the market such as the poor U.S. ISM, the weak Nasdaq market and a rising yen," said Takuya Takahashi, a strategist at Daiwa Securities.
The dollar dropped to 107.885 yen overnight, its lowest since early January, before recovering to 108.045 yen in Asian trade.
But Takahashi said that sharp losses in manufacturers' stocks over the past month triggered temporary short-covering.
Fanuc Corp rose 1.3% after dropping 13% over the past month, while Tokyo Electron gained 1.4% after shedding 17%.
A drop in the U.S. technology sector overnight chilled investor sentiment, dragging down SoftBank Group Corp by more than 3%. The stock took a hefty negative 30 points off from the Nikkei, with traders citing concerns about the profitability of its tech-focused Vision Fund.
"Investors are starting to question the Vision Fund's investment performance. They are questioning technology companies' valuations whose sales are soaring but not the profitability," said Makoto Kikuchi, the chief executive of Myojo Asset Management.
SoftBank Group stock tumbled 6.2% on Monday after the Wall Street Journal reported that the company's bid to raise a second mega fund has met with a chilly reception from some of the world's biggest money managers.
Casio Computer jumped 2.3% after the company said that it will buy back up to 5 billion yen of its own shares.
The broader Topix shed 0.4% to 1,492.49. (Editing by Shri Navaratnam)