Nikkei falls as traders lock in gains after US trade deal rally

TOKYO, July 25 (Reuters) - Japan's Nikkei share average dropped on Friday, halting a two-day advance that brought the index to the brink of a record, as traders locked in gains spurred by a newly inked trade deal with the United States.

The Nikkei 225 Index .N225 was down 0.4% at 41,655, as of 0145 GMT. The broader Topix .TOPX, which hit an all-time high on Thursday, dropped 0.5% earlier in the day.

The trade deal, announced late on Tuesday by U.S. President Donald Trump, reduced a reciprocal tariff on Japanese goods and autos-specific levies to 15% from the 25% Washington had threatened previously.

Shares of industrial robot maker Yaskawa Electric 6506.T dropped 5.3%, shedding a steep three-day advance. Mitsubishi Motors 7211.T plunged 8% after the automaker reported an 84% drop in first-quarter operating profit.

A Nomura Securities analyst said there were signs the market was "overheating." The Nikkei's 14-day relative strength index (RSI), a technical measure for an investment momentum, reached 77.8 on Thursday, the highest since the stock gauge hit its all-time high of 41,889.16 in July 2024.

There were 60 advancers in the Nikkei index against 164 decliners.

The largest losers by percentage in the index were Shin-Etsu Chemical 4063.T, down 9.2%, followed by Mitsubishi Motors.

The biggest gainers were motor maker Nidec 6594.T, up 2.6%, followed by chip industry supplier Disco 6146.T, which rose 2.5%.