TOKYO, May 15 (Reuters) - Japan's Nikkei share average dropped for a second day on Thursday, extending its retreat from a nearly three-month peak, as a stronger yen sent automaker shares sliding.
The Nikkei .N225 sank 1.1% to 37,705.74 as of the midday recess, as the yen strengthened for a third day, eroding the value of Japanese exporters' overseas revenues.
Japan's benchmark index had rallied 25% between a low on April 7 and the high on Tuesday, partly as optimism built for a spate of U.S. trade deals that would remove the risk of a global recession.
The broader Topix .TOPX fell 1% on Thursday, also a second session of losses.
"The run-up in the Nikkei had been very fast, and we're still at a very high level," said Maki Sawada, a strategist at Nomura.
"Investors are cautious that there is still a degree of overheating in the market."
Transport equipment .ITEQP.T was the worst performer among the Tokyo Stock Exchange's industry groupings, dropping 2.6%.
Toyota 7203.T and Honda 7267.T each tumbled 3.2%, and Nissan 7201.T slumped 3.4%.
Electronics exporters were also weak, with Sony 6758.T losing 3.8% and Nintendo 7974.T slipping 2.7%.
Chip shares declined. Advantest 6857.T was off 1.8% and Tokyo Electron 8035.T eased 1%.
Uniqlo owner Fast Retailing 9983.T fell 2% to be the biggest points drag on the Nikkei due to its heavy weighting.
Of the Nikkei's 225 components, 172 fell and 53 rose.
Shipping .ISHIP.T was a bright spot, jumping 2.5% to be far and away the best performing TSE industry sector, as a thaw in Sino-U.S. trade relations boosted the outlook for cargo traffic.
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