Nikkei falls for 2nd day led by financials; Fed stimulus concern hits
* Nikkei breaches bottom of Ichimoku cloud
* Financials fall as investors reduce risky assets - fund manager
* Market hold breath for fear USD may break below 97 yen - analyst
TOKYO, Aug 16 (Reuters) - Japan's Nikkei share average fell for a second day on Friday led by financials, after Wall Street weakened as another batch of upbeat U.S. data added to speculation that the Federal Reserve may begin to trim its stimulus soon. The Nikkei dropped 1.2 percent to 13,585.57 in mid-morning trade, breaking below the bottom of the Ichimoku cloud of 14,179.23. On Friday morning, investors closely watched the currency market for further direction. "Investors were holding their breath for fear that the dollar may break below the 97-yen line," said Hiroyuki Fukunaga, the chief executive of Investrust. "If the dollar breaches that level, more selling could hit." The dollar was last down at 97.26 yen after falling to as low as 97.02 yen earlier. The Topix fell 1.0 percent to 1,140.18. Of Topix's 33 subsectors, 32 were in negative territory, with financials leading the declines. The insurance sector dropped 2.2 percent, with Dai-ichi Life Insurance Co falling 2.2 percent and T&D Holdings Inc shedding 2.4 percent. Banks and securities firms were also battered, with Mitsubishi UFJ Financial Group dropping 1.7 percent and Nomura Holdings Inc shedding 1.8 percent. "When foreign investors want to change Japanese stocks' weighting, they tend to make changes in their financial stocks' holdings because of their higher liquidity," a fund manager at a Japanese asset management firm said. "They want to reduce some risky assets today." Exporters were generally lower on worries about the yen's strength, with Toyota Motor Corp falling 1.0 percent, Honda Motor Co shedding 1.3 percent and Panasonic Corp declining 1.5 percent. A strong yen cuts Japanese exporters' competitiveness abroad. Analysts said that trading will likely remain subdued due to the summer lull, and selling in futures by program traders could heighten volatility in the cash market. "Investors are becoming risk-averse before the weekend. The mood is down mainly due to weak U.S. shares," said Yoshiyuki Kondo, an analyst at Daiwa Securities. Kondo also said that Japanese ministers' comments on a potential corporate tax-cut may remain a drag on sentiment. On Thursday, Japanese government spokesman Yoshihide Suga and Finance Minister Taro Aso both downplayed this week's report in the Nikkei business daily that the government is considering a corporate tax cut. In the United States overnight, slowly improving U.S. jobs data and rising consumer prices added to speculation the Fed will soon begin to trim its considerable support of the economy and asset prices. Poor results and outlooks from Wal-Mart Stores' and Cisco Systems dragged down consumer and technology stocks in the United States. The Nikkei has risen around 30 percent this year, driven mainly by the Japanese government's aggressive stimulus policies aimed at pulling the economy out of stagnation.