Nikkei down over 2 pct, investors skittish over yen

                                
 * Investors skittish before long weekend close positions
                                
 * Yen's rise, worries of more prompt Nikkei underperformance
                                
 By Elaine Lies
                                
 TOKYO, July 16 (Reuters) - Japan's Nikkei average fell more
than 2 percent on Friday as investors took profits before a long
weekend, worried that the yen could advance further towards
15-year highs against the dollar amid concern about the pace of
U.S. economic recovery.
                                
 Trade was thin and some in the market said large-lot selling
of futures by a foreign investor shortly after the open had set
off selling that picked up speed, resulting in the Nikkei vastly
underperforming the rest of Asia.
                                
 Wall Street ended flat after spending much of Thursday in
negative territory after an unexpected fall in regional factory
activity and a third straight month of decline in producer prices
raised concerns about deflation, cooling enthusiasm for the
strong start to the earnings season. [.N]
                                
 JPMorgan Chase & Co <JPM.N> reported quarterly earnings that
beat expectations but offered a cautious outlook on the economy.
[ID:nN13247761]
                                
 "Risk avoidance is increasing and investors are unwinding
long positions now ahead of the weekend," said Nagayuki
Yamagishi, a strategist at Mitsubishi UFJ Morgan Stanley.
                                
 "If the yen rose by 1 or 2 yen against the dollar during that
time, it'd be really tough."
                                
 The benchmark Nikkei <.N225> lost 2.3 percent to 9,463.27
while the broader Topix <.TOPX> lost 1.7 percent, dipping to
841.86.
                                
 "The U.S. indicators have been pretty poor even though
(corporate) results were good, and the Fed's gloomy view of the
economy the other day has really increased overall uncertainty,"
said Noritsugu Hirakawa, a strategist at Okasan Securities.
                                
 Minutes of the Fed's June meeting out on Wednesday showed
policy-makers felt they should be ready to consider additional
steps to boost the U.S. economy if an already softening outlook
worsens. [ID:nN14148574]
                                
 The dollar weakened to near 2-1/2-month lows against a basket
of currencies on Friday and was heading back towards a
seven-month low of 86.96 yen hit in early July.
                                
 The greenback had lost 0.5 percent to 87.02 yen <JPY=> after
falling more than 1 percent the day before, with the euro down
0.6 percent at 112.34 yen <EURJPY=R>.
                                
 Canon Inc <7751.T> slipped 2.6 percent to 3,400 yen and Tokyo
Electron <8035.T> lost 2.6 percent to 4,830 yen. Sony Corp
<6758.T> fell 4.6 percent to 2,443 yen.
 (Editing by Michael Watson)