Nikkei hits 3-week low, exporters, chip shares fall

TOKYO, Feb 7 (Reuters) The Nikkei average slipped 0.66 percent to its lowest close in three weeks on Wednesday as shares in tech firms including Canon Inc. and other exporters slid with the yen near a one-month high against the dollar.

Advantest Corp. and other chip-related stocks extended losses after their earnings disappointed investors.

But utility shares such as Chubu Electric Power Co. Inc.

gained as investors bought stocks with high dividend yields amid expectations the Bank of Japan will keep interest rates unchanged at its Feb. 20-21 policy meeting.

''The market is vulnerable to selling as investors are eager to take profits following corporate earnings reports that were almost in line with their expectations,'' said Takahiko Murai, general manager of equities at Nozomi Securities.

Trade was driven by movements in the futures market which was under selling pressure ahead of Friday's settlement of options contracts, he added.

The Nikkei was down 114.54 points at 17,292.32, its lowest close since Jan. 17. The broader TOPIX index fell 0.23 percent to 1,728.36.

Yoshinori Nagano, chief strategist at Daiwa Asset Management, said the market may retreat further in the short term as it looks technically weak after the Nikkei fell below the 25-day moving average of 17,311.06 on Wednesday.

''A deep correction is unlikely to occur, as investors are eager to buy on dips,'' he said.

With the quarterly earnings season having peaked, investors are turning their attention to the Bank of Japan's policy meeting, he said.

TECHNOLOGY SHARES FALL Technology shares were among major drags on the Nikkei on Wednesday, with Canon falling 1.8 percent to 6,120 yen and Kyocera Corp losing 1.0 percent to 10,690 yen.

Both firms make much of their sales in overseas markets and benefit from a weaker yen.

In early trade the yen was near one-month highs against the dollar near 120 yen, supported by concerns that the currency's relative weakness may be discussed at this weekend's meeting of Group of Seven finance ministers and central bankers.

The G7 meeting remains the market focus as European officials have been calling for debate on the yen's weakness, while U.S.

and Japanese officials have been playing down the issue.

Advantest, the world's largest supplier of microchip testers, slid 4.1 percent to 5,450 yen, having already lost about 14 percent in the past month. It posted a drop in quarterly profit late last month and lowered its full-year forecast.

The chip sell-off even hit shares of Tokyo Electron Ltd., which fell 1.7 percent to 8,460 yen despite having said on Tuesday its quarterly operating profit more than doubled.

''As a whole, earnings results of chip-gear makers have not been that good,'' said Katsuhiko Kodama, a senior strategist at Toyo Securities. ''Tokyo Electron's earnings results were really strong, but it has been dragged down by its peers.'' Among notable gainers, Konami Corp. jumped 8.7 percent to 3,360 yen after its earnings results prompted brokerage Credit Suisse to lift its rating on the game maker to ''outperform'' from ''neutral''.

Shares of Asahi Breweries Ltd. rose 5.3 percent to 2,015 yen after it said on Tuesday it will pay 8 million to take a 10 percent stake in tomato sauce maker Kagome Co. Ltd. and will adopt poison pill defence measures against possible hostile takeover bids.

REUTERS CS VV1317