Nikkei drops on 'overbought' signs; exporters, utilities weak

* Nikkei down 0.3 pct, Topix off 0.5 pct

* 9,500-level still psychologically important - analyst

* FOMC eyed - analyst

* Asian funds' buying limiting drops - analyst

* Utilities down on Atomic Power's possible decommission of plant

* Renesas surges on investment plan

TOKYO, Dec 11 (Reuters) - Japan's Nikkei share average slipped on Tuesday as investors, cautious over signs that the market is overbought after a 10 percent rally over the past month, took profits on export-focused firms. Investors also held off from taking positions ahead of a two-day policy meeting of the U.S. Federal Reserve starting later on Tuesday where it is expected to announce a new round of Treasury securities purchases, analysts said. at 9,506.29. Its 14-day relative strength index stood at 66.93, coming off from the previous day, but the market remained cautious. A level of 70 or above is deemed overbought, and can often signal a pullback in the near term. "The 9,500-level is still an important psychological line for both support and resistance purposes," said Yutaka Miura, a senior technical analyst at Mizuho Securities. Exporters have led gains in the market over the past month on the back of a weaker yen, after Shinzo Abe, the leader of the main opposition which is expected to win a Dec. 16 general election, called for the Bank of Japan to embark on "unlimited easing." On Tuesday, exporters led the decline with Honda Motor Co falling 1.1 percent, Sony Corp slipping 1.7 percent and Komatsu Ltd dropping 0.9 percent. But analysts said that losses should be limited as some investors were still buying exporters, having missed the rally. "Some funds which invest in Asian funds have failed to chase the market higher over the past month as the market started rising too fast... they could not make a quick investment decision," said Kenichi Hirano, a strategist at Tachibana Securities. "Now they are trying to catch up with the rises and add more long positions on Japanese stocks when they fall."

UTILITIES SINK Power utilities also came under pressure on news that Japan Atomic Power Co, in which the firms hold a stake, may have to decommission one of its reactors after seismologists concluded the plant in western Japan is sitting over an active faultline.

Kansai Electric Power Co sank 6.4 percent and Chubu Electric Power Co sagged 5.7 percent, while Tokyo Electric Power Co and Chugoku Electric Power Co shed 2.1 percent and 2.4 percent, respectively. Bucking overall market weakness, struggling Japanese chipmaker Renesas Electronics Corp added 3.6 percent to 319 yen after hitting an intraday high of 350 yen on news that it will receive 150 billion yen ($1.8 billion) in aid from a government-backed fund and manufacturers to help it stay afloat. The broader Topix index dropped 0.5 percent to 784.52.