Nikkei slips on weaker Asia shares, selling ahead of fiscal year-end

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* Nikkei loses traction after brushing 2-1/2-mth high

* Window dressing before FY-end seen capping stocks

* Yen's weakening shores up exporter automakers

TOKYO, Feb 26 (Reuters) - Japan's Nikkei share averageclosed slightly weaker on Tuesday, having touched its highestlevels since mid-December earlier in the day before a decline inAsian stocks and selling pressure ahead of the fiscal year-endin March forced a retreat.

The Nikkei .N225 ended the day down 0.37 percent at21,449.39 after touching a high of 21,610.88, a level unseensince mid-December.

MSCI's broadest index of Asia-Pacific shares outside Japan.MIAPJ0000PUS fell 0.5 percent on Tuesday as its recent run toa five-month high ran out of steam.

"Receding trade tensions and hopes for dovish Fed policy wasof help to Japanese stocks but these are mostly eternal factors,not indigenous ones. Selling generated by window-dressingtowards the end of the fiscal year is capping the market," saidTakashi Hiroki, chief strategist at Monex Securities.

"Selling pressure, however, could ease if the 21,700 levelon the Nikkei is reached. That level represents a 50 percentreversal from the recent plunge and if cleared, short sellersmay be forced to reverse their positions."

The 21,700 mark for the Nikkei lies halfway between a27-year peak of 24,448 scaled in October and a 20-month troughof 18,948 plumbed in December.

Exporter shares such as automakers rose following the recentweakening by the yen against the dollar. Mazda Motor Corp7261.T climbed 0.3 percent, Honda Motor Co7267.T added 0.1percent and Nissan Motor Co7201.T rose 0.5 percent.

Petroleum and natural gas developer Inpex Corp1605.T fell3.8 percent and refiners Showa Shell Sekiyu KK 5002.T andCosmo Energy Holdings Co 5021.T were down 2 percent and 2.3percent, respectively, following a steep drop in crude prices.

Defensive shares such a utilities and healthcare performedwell, with Tokyo Electric Power Co9501.T rising 1.1 percentand drugmaker Daiichi Sankyo Co4568.T gaining 2.7 percent.

Izutsuya Co8260.T surged 11 percent after the operator ofdepartment stores raised its operating profit forecast for theyear through February 2019 to 1.3 billion yen ($11.72 million)from 1.1 billion yen.

Of the 33 subsectors at the Tokyo Stock Exchange 23declined, led by mining .IMING.T .

The broader Topix .TOPX shed 0.23 percent to 1,617.20.

($1 = 110.9500 yen) (Editing by Simon Cameron-Moore) ((; Reuters

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