Nikkei sheds 2.7 pct, retreats from 54-month high on Cyprus fears
* Nikkei may shed more if dollar/yen drops below its 25-day MA - analyst
* Unusual Cyprus bailout plan spooks investors
* Exporters, financials lead losses
* Panasonic rises; considering exit from some businesses
TOKYO, March 18 (Reuters) - Japan's Nikkei share average dropped 2.7 percent on Monday, pulling back from a 54-month high and posting the biggest slide in 10 months after a proposed bank bailout for Cyprus spooked investors, strengthening the yen and hurting economy-sensitive shares that have gained recently. The Nikkei dropped 340.32 points to 12,220.63, posting its biggest one-day percentage drop since May 2012 and breaking below its five-day moving average of 12,343.45. On Friday, it hit 12,560.95, the highest level since early September 2008. Exporters, which have rallied sharply in the past few months on Prime Minister Shinzo Abe's aggressive monetary easing, led the fall, with Sony Corp falling 6.8 percent and Toyota Motor Corp shedding 3.4 percent. Banks, which have also benefited from Abe's reflationary policy, lost ground, with Mitsubishi UFJ Financial Group dropping 3.1 percent and Sumitomo Mitsui Financial Group shedding 2.7 percent. "Uncertainty over the euro-zone debt problems is hurting Japanese stocks in an indirect way. It is going to take away more of its recent gains depending on where the yen level will be for the next few days," said Hikaru Sato, a senior technical analyst at Daiwa Securities. Sato said that as long as the dollar trades above 94 yen, declines should be limited for the Nikkei. "Stock investors are watching the dollar-yen's 25-day moving average (of 93.95), and if it breaks this level, it will suggest a strong yen trend in the near-term, and there will likely be further selling in stocks," Sato said. In a radical departure from previous rescue deals, euro zone finance ministers want to levy around 10 percent out of Cyprus deposit accounts before the island nation can receive a 10 billion euro ($13 billion) bailout. Cyprus was working on a last-minute proposal to soften the blow after a parliamentary vote on the measure was postponed until Monday, a government source said. "People are carefully monitoring how European shares will react to this news later in the day," said Hiroyuki Fukunaga, chief executive of Investrust. "We need to be prepared for a possibility of the Nikkei falling below the 12,000-line tomorrow if European shares fall sharply. But even if European shares' drops are limited, Japanese stock investors may take more profits if the weak yen trend is going to pause." The yen last traded at 94.58 against the dollar, rising from 95.38 yen late on Friday. The Japanese currency has fallen 18 percent against the dollar since mid-November after Abe called for bold fiscal expansionary and monetary easing policies to whip deflation in his election campaign. During the same time, the benchmark Nikkei has rallied 41 percent. The broader Topix fell 2.2 percent to 1,028.34. Volume was relatively low, with 3.11 billion shares changing hands, compared with last week's average daily volume of 3.72 billion. Panasonic Corp bucked the broad market to gain 0.6 percent after reports said the troubled consumer electronics maker was considering selling its healthcare business to raise cash. The Nikkei newspaper also said the company was leaning toward withdrawing from plasma television operations as part of a downsizing of its TV business.