Nikkei drops as investors cautiously await G20; cyclical stocks fall

* Nikkei heads for the first drop in 4 weeks
* Defensive stocks buck weak market

By Ayai Tomisawa
TOKYO, June 28 (Reuters) - Japan's Nikkei fell on Friday as
investors turned cautious ahead of much awaited talks between
U.S. and Chinese leaders at the G20 summit, with cyclical shares
sliding on profit-taking before the weekend.
The Nikkei share average .N225 dropped 0.5% to 21,222.44
points by midmorning, after rising 1.2% on Thursday on investor
optimism that there will be progress in the U.S.-China trade
dispute.
U.S. President Donald Trump said on Wednesday a trade deal
with Chinese President Xi Jinping was possible this weekend but
he is prepared to impose U.S. tariffs on most remaining Chinese
imports if the two countries don't agree. Trump said on Friday he will discuss trade with Japanese
Prime Minister Shinzo Abe at their talks on the sidelines of the
G20) summit, as Washington pushes to cut its big trade deficit.
But ahead of the weekend, investors turned cautious and
unwound their positions in cyclical stocks, analysts said.
For the week, the Nikkei looked set to shed 0.2%, heading
for its first weekly decline in four weeks.
"Even if the two countries land a positive agreement,
Japanese equities would benefit little. Expectations in the
market are that the U.S. will ease their monetary policy, which
would make the dollar pressured against the yen," said Isao
Kubo, an equity strategist at Nissay Asset Management.
"Whether the yen strengthens or not is also of investor
concern."
Exporters, which rose the previous day, lost ground on
profit-taking. Tokyo Electron 8035.T dropped 0.8%, Subaru Corp
7270.T shed 1.2% and Fanuc Corp 6954.T fell 1.5%.
Bucking the weakness, defensive shares were in demand.
Astellas Pharma 4503.T soared 1.3% and Otsuka Holdings
4578.T rose 1%, while Tokyo Gas 9531.T added 0.2%.
The broader Topix .TOPX dropped 0.5% to 1,546.06.

(Editing by Kim Coghill)