Nikkei down 1.2 pct as Canon, recent gainers fall

TOKYO, May 11 (Reuters) The Nikkei average fell 1.16 percent on Friday as investors took profits in gainers such as Canon Inc. after a drop in U.S. stocks on disappointing retail sales and a widening trade deficit that aroused worries about its economy, one of the main markets for Japanese goods.

Tsuyoshi Segawa, an equity strategist at Shinko Securities, said investors also appeared eager to see how Chinese markets open later in the morning following the Bank of England's rate hikes and growing concern about the U.S. economic outlook.

''On top of the fact that investors were already cautious before another peak of earnings announcements next week, it is unavoidable for Japanese stocks to fall on U.S. stocks,'' he said.

British interest rates hit a 6-year high of 5.5 percent on Thursday and could rise further still as the Bank of England tries to rein in inflation, now at its highest level in more than a decade.

''Investors still remember the February global market sell-off was sparked by policies to suppress an overheated economy in China,'' Segawa said.

The Nikkei was down 205.28 points at 17,531.68 as of 0054 GMT. The broad TOPIX index lost 1.08 percent to 1,718.27.

Shares of Yamada Denki Co. Ltd. declined for the second straight session after Japan's anti-monopoly watchdog said it was investigating the electronics retailer on suspicion it had coerced suppliers into helping it staff its stores.

Yamada Denki, which had acknowledged in statement that it was under investigation, fell 1.6 percent to 10,820 yen, extending losses from the previous session's 2 percent fall.

But McDonald's Japan added 1 percent to 1,941 yen after the nation's biggest fast-food chain booked a jump in quarterly net profit and lifted its forecasts for this year, boosted by the popularity of ''Mega Macs'' and its new ''McGriddles'' breakfast menu.

Canon was down 2 percent at 6,900 yen.

Reuters SBA VP0705