* Nikkei tracks U.S. stocks lower, profit-taking emerges
* Gains above 11,000 yen tough without strong results, data
* Astellas extends losses on looming competition, ratings cut
By Elaine Lies
TOKYO, Aug 12 (Reuters) - Japan's Nikkei average pulled back
from 10-month highs on Wednesday, as concerns over a U.S.
economic recovery grew after an unexpectedly large drop in
wholesale inventories and negative comments about the banking
sector from a prominent analyst.
Analysts said investors were locking in profits ahead of the
end of a Federal Reserve board meeting and the issuance of its
policy statement, with attention on whether it will unwind some
of the quantitative easing policies currently in place.
Astellas Pharma Inc <4503.T> extended losses by 3.8 percent
on looming competition and a ratings downgrade after Novartis
said during Tokyo market hours on Tuesday that its Sandoz unit
has launched the first generic version of Astellas' Prograf
transplant drug [].
"There's some concern that the Nikkei has been overbought,
and that put together with an inability to read what the Fed
might do is leading to profit-taking," said Takashi Ushio, head
of the investment strategy division at Marusan Securities.
But analysts said falls were limited by buying on dips by a
broad range of investors, including foreign investors, who have
been net buyers of Japanese stocks for five straight days.
The benchmark Nikkei <> shed 0.8 percent or 82.50 points
to 10,502.96 after rising to a 10-month high of 10,587.36 on
Tuesday. The broader Topix <> fell 0.9 percent to 964.78.
"I wouldn't go so far yet as to call what's happening now an
adjustment, but for the Nikkei to rise past 11,000 we need to see
proof of quite a sharp recovery in earnings," said Ushio.
Worries about the sturdiness of the U.S. economic recovery
were fed by a government report showing U.S. wholesalers cut
their inventories of unsold golds for a 10th straight month in
July, suggesting businesses remain sceptical about a return in
demand. []
Additional concern arose after Rochdale Securities analyst
Richard Bove painted a gloomy outlook for the U.S. banking
industry, saying he expected a short-term pull-back in bank stock
prices and sending the S&P 500 financial sector <.GSPF> down 3.5
percent.
But the Nikkei shrugged off data showing Japanese wholesale
prices fell a record 8.5 percent in July from a year earlier,
highlighting growing deflationary pressure in the economy and
limiting the Bank of Japan's scope for ending its unorthodox
policy measures.
EXPORTERS SLIP
Though the yen advanced against the dollar, which shed 0.3
percent against the Japanese currency to 95.71 yen <JPY=>, market
players said the correlation between equities and foreign
exchange was weakening a bit.
"Earnings are improving and there are signs of strengthening
demand, particularly in the electronics and autos sectors, that
suggest shares of those companies will do well even if the dollar
slips 1 or 2 yen," said Hideyuki Ishiguro, a manager at the
investment information section of Okasan Securities.
"In addition, the current dollar/yen rate is higher than the
rate many companies have set to forecast earnings, meaning that
their earnings won't be that affected by a small shift either."
Canon <7751.T> slipped 0.9 percent to 3,450 yen, Sony Corp
<6758.T> fell 1.3 percent to 2,735 yen, and Honda Motor Co
<7267.T> lost 2.2 percent to 3,050 yen.
Astellas Pharma, Japan's No.2 drugmaker, slipped 3.8 percent
following the Novartis announcement and after UBS Securities cut
its rating on Astellas to "neutral" from "buy," while Nikko Citi
lowered its target price for the company to 3,700 yen from 3,800
yen despite keeping its "neutral" rating.
But Nippon Sheet Glass <5202.T> bucked the trend to extend
gains after Tuesday's jump, rising 2.3 percent to 363 yen as
foreign investors snapped up shares of companies with a large
global presence amid economic recovery expectations, a market
analyst said.
Trade was thin on the Tokyo exchange's first section, with
851 million shares changing hands, below last week's morning
average of 962 million.
Declining stocks outnumbered advancing ones by nearly 3 to 1.
(Reporting by Elaine Lies; Editing by Joseph Radford)
