Nikkei slips after 5-session rally; utility shares drop

* Nikkei down 0.2 pct, Topix up 0.1 pct

* Utilities fall on Nomura rating cuts

* Foreigners place net buy orders for Japan stocks

TOKYO, Jan 7 (Reuters) - The Nikkei edged down on Monday morning as profit-taking kicked in after a five-session winning streak that had taken Japan's benchmark index to a 22-month high, while utility shares led losses on brokerage rating downgrades. Analysts said sentiment in the Japanese market remained positive, underpinned by encouraging U.S. jobs data and expectations of aggressive monetary stimulus under new Prime Minister Shinzo Abe, which have weakened the yen and boosted exporters' shares over the past two months. But they also noted that a correction was no surprise with technical charts signalling overbought levels. The Nikkei dropped 0.2 percent to 10,670.16 by midmorning, after rising as high as 10,743.69 in early trade. "Investors have been carefully waiting for the timing to take profits as they believed the market can't keep rising," said Yutaka Miura, a senior technical analyst at Mizuho Securities. "If volume keeps up, the drop may not be sharp," he added. The Nikkei has risen about 23 percent since mid-November when Abe started calling for aggressive easing, taking the Nikkei deeper into "overbought" territory. Its 14-day relative strength index is at 81.89, far above 70 which is considered overbought and often indicates an imminent adjustment. On Monday, foreign brokers placed net buy orders of 11.3 million shares, their largest net purchase since Dec. 17. Some exporters succumbed to profit-taking, with Canon Inc dropping 1.3 percent and Toshiba Corp shedding 1.1 percent. But others were still in demand, with Toyota Motor Corp adding 0.5 percent, Honda Motor Co gaining 1.1 percent and Sony Corp rising 0.4 percent. "Japanese shares will likely continue attracting buying as the conditions are good for them," said Hiroichi Nishi, general manager at SMBC Nikko Securities, adding that some investors believe exporters' earnings will be better than expected. On Friday, the dollar climbed to a nearly 2-1/2 year peak against the yen after the Federal Reserve flagged concerns about the risks of its stimulative monetary policy. The dollar rose as high as 88.40 yen, according to Reuters data, the highest since July 2010. A weaker yen lifts exporters' overseas earnings when repatriated. But utility stocks tumbled, becoming the worst sectoral performer after Nomura Securities cut its ratings on some power utility companies. Kansai Electric Power Co tumbled 4 percent after Nomura cut its rating to "reduce" from "neutral", saying there was unlikely to be changes in the Nuclear Regulation Authority's stance on refusing to reopen nuclear plants unless deemed safe. Kyushu Electric Power Co fell 2.9 percent after Nomura cut its rating to "reduce" from "neutral". The broader Topix fell 0.1 percent to 887.57.