Nikkei down 1.5 pct on lower U.S. stocks, firmer yen

TOKYO, May 25 (Reuters) The Nikkei share average fell 1.46 percent on Friday after recent gains, tracking a decline in U.S. stocks while exporters such as Canon Inc. were hit by a slightly stronger yen.

The yen firmed a bit against the dollar after data showed Japan's core consumer prices fell at a slower pace in April as expected, keeping the Bank of Japan on track to lift interest rates in coming months.

Investors are also still concerned about China after former Federal Reserve Chairman Alan Greenspan warned of a possible fall in Chinese stocks, said Zenshiro Mizuno, senior managing director at Marusan Securities.

Greenspan said he feared a ''dramatic contraction'' in Chinese stocks and that the recent boom was ''clearly unsustainable.'' ''The market here is taking a breather after the blue-chip stocks marked a solid rise in recent sessions,'' Mizuno added.

''Because the fall is largely due to profit-taking, the bottom level is likely be limited.'' The Nikkei was down 258.99 points at 17,437.98 as of 0041 GMT.

The broader TOPIX index declined 1.61 percent to 1,710.08.

The dollar dipped 0.2 percent to a low near 121.15 yen down from 121.40 in late New York trade on Thursday.

Exporters fell with Canon down 2 percent at 6,980 yen, and Tokyo Electron Ltd. dropping 2.4 percent to 8,690 yen.

A stronger yen weighs on exporters as it cuts the value of their overseas sales when translated back into the Japanese currency.

But shares of Fujitsu Ltd. gained 3.1 percent to 823 yen after the company said it would buy back up to 28 billion yen of its own shares and use them in a swap to fully consolidate three units -- Fujitsu Access Ltd., Fujitsu Devices Ltd. and unlisted Fujitsu Wireless Systems Ltd.

REUTERS DKS PM0650