Nikkei down on debt jitters, key support breached

* Nikkei down 0.9 pct, Topix down 0.7 pct

* 200-day moving average of 9,903 breached

* Investors shift into defensive stocks, sell banks

* Utilities down after Kansai Electric shuts reactor

By Antoni Slodkowski

TOKYO, July 19 (Reuters) - The Nikkei stock average fell on
Tuesday, moving further away from four-month highs, as banks
were sold by European and domestic players on growing
frustration with governments' inability to solve debt crises in
the United States and Europe.

A stronger yen, which last week hit a four-month high of
78.45 yen against the dollar on global debt woes, pressured
blue-chip exporters, with Canon Inc falling 2.8 percent
to 3,680 yen and Sony Corp losing 2.5 percent to 2,088
yen.

Kansai Electric slumped 3.3 percent to 1,393 yen
after the company halted one of its reactors due to technical
glitches, sending other utilities lower on worries about tight
power supply.

The yen and anxiety about U.S. and European debt spurred a
shift into defensive shares, with Internet companies, retailers
and telecommunication firms posting strong gains.

Asian investors were also seen as supporting the market.

"Investors, worried about the global economy, are again
turning to companies with high exposure to the domestic market,"
said Takashi Aoki, a senior fund manager at Mizuho Asset
Management.

Telephone company NTT rose 1.7 percent to 3,910
yen. Seven & I Holdings , Japan's biggest retailer, made
its biggest gain in more than two weeks, adding 1.4 percent to
2,264 yen.

"There has been a tacit understanding that thanks to the
previous intervention the yen isn't going to rise significantly,
but as dollar/yen is close to 78 yen it emerges as a fresh
negative factor weighing on sentiment," said Aoki.

The benchmark Nikkei closed down 0.9 percent at
9,889.72, having breached crucial support at its 200-day moving
average of 9,903.

The benchmark has been trapped between that level and its
resistance at 10,000 for over a week as investors ponder their
next step, torn between mounting debt woes and relatively strong
U.S. corporate earnings, which suggest Japanese firms may also
report better-than-expected figures later this month.

The broader Topix fell 0.7 percent to 853.75.

Euro-zone leaders will meet on Thursday to finalise a second
round of aid for Greece worth 110 billion euros ($154 billion),
while political leaders remain at an impasse with the clock
ticking in Washington before an Aug. 2 deadline on the federal
borrowing limit.

INTERNET STOCKS HIGHER

Rotation into domestic demand-related stocks benefited some
Internet shares. Internet advertising service company Cyber
Agent extended its winning streak to a fourth day, up
0.5 percent at 298,400 yen. Gree rose as much as 1.2
percent earlier, before closing down 0.7 percent at 1,847 yen on
light profit-taking.

Internet shares were also supported as margin traders were
detected selling Nintendo , pulling the game giant down
2.7 percent to 14,760 yen, while piling into social gaming
shares.

Nintendo came within shouting distance of a 5-1/2 year low
after Macquarie Securities slashed its rating to "neutral" from
"outperform" and cut its target share price to 16,000 yen from
23,000 yen, citing struggling sales of its 3D-capable handheld
device and pressure on earnings from the stronger yen.

"The company's focus on doing both hardware/software, while
noble, will ultimately limit its ability to be relevant in a
'smartphone in every pocket' world," said Macquarie analyst
David Gibson.

"In particular the company is not exposed to growth in SNS,
smartphone, PC and MMO games spending," said Gibson referring to
different kinds of online games.

IBM PROVIDES SUPPORT

Better-than-expected earnings from IBM raised hopes
that this year would be a good one for the technology sector and
lent some support.

"U.S. earnings like Google and IBM have shown recoveries in
the corporate sector. People want to see if the macro data is
also recovering," said Yumi Nishimura, a senior market analyst
at Daiwa Securities.

Earnings from Apple Inc and financials like Bank of
America Corp are due out later in the day while U.S.
housing starts are due later this week.

Earnings and a slew of important U.S. macro data due this
week depressed volumes with 1.5 billion shares changing hands on
the main board, below last week's lukewarm average volume of
around 1.7 billion shares.

The banking index was one of the biggest losers
among the 33 Topix subindexes, dropping 1.3 percent to a
2-1/2 week low. Mitsubishi UFJ Financial Group fell 2.5
percent to 383 yen, while Sumitomo Mitsui Financial Group
dropped 1.3 percent to 2,404 yen.

(Additional reporting by Ayai Tomisawa; Editing by Chris
Gallagher)