Nikkei falls on U.S. debt default worries, strong yen

* Five-day moving average of 10,020 likely to hold

* Sharp selling not expected ahead of earnings-fund manager

By Ayai Tomisawa

TOKYO, July 25 (Reuters) - The Nikkei average snapped a
three-day run of gains on Monday after U.S. debt ceiling worries
nudged the yen higher, but a key technical support is likely to
hold on hopes that upcoming Japanese corporate earnings will be
strong.

The U.S. government's failure to win an agreement
on the debt ceiling has made markets more nervous but Tokyo
stocks were not expected to tumble further at this stage unless
there are sharper gains in the yen.

"The market is jittery about the possibility of a U.S. debt
default, but Tokyo stocks are gradually falling, not sharply, as
they are tracking the pace of the gradual rise in the yen," said
Fujio Ando, senior managing director at Chibagin Asset
Management.

" Investors do not want to sell stocks sharply as
they are also cautious about the possibility of foreign exchange
intervention if the yen strengthens sharply."

White House officials and Republican leaders scrambled to
reassure that the United States would avert a debt default, but
the two sides did not appear to be moving closer to a deal
.

The Nikkei shed 0.5 percent to 10,081.81, with
analysts saying its 5-day moving average at 10,020 is likely to
hold. The broader Topix was down 0.4 percent to 865.26.

Trade may be subdued ahead of corporate earnings
later this week, with most expecting the results to provide
further evidence of a recovering economy.

"Company earnings will likely provide some support
this week. Macro indicators such as export data are showing
signs recovery, so there won't be much selling going forward,"
Ando said.

Japan's exports rose in June and the pace of annual declines
slowed, bringing the trade balance back into surplus as factory
output and sales steadily recover from the March 11 earthquake,
tsunami and nuclear meltdown.

The dollar slipped in early Asia-Pacific trade on Monday,
falling to a near four-month low of 78.13 yen , from 78.52
yen on Friday. It trimmed its losses and traded at 78.47 in
early morning trade.

Exporters were weaker, with bellwether Toyota Motor
falling 1.1 percent to 3,300 yen and Sony shedding 1.8
percent to 2,062 yen.

Nidec rose 1.3 percent to 7,900 yen after the
maker of precision motors raised its operating profit forecast
for the year to next March by 6 percent to 90 billion yen,
citing a faster-than-expect demand recovery from March 11
disaster.

Shares of Japan's top oil and gas developer, Inpex Corp
, gained 1.0 percent to 611,000 yen, reaching its
highest in two weeks. The company said on Friday that its joint
venture with a Japanese government affiliate will sell a 30
percent stake in Indonesia's Abadi gas field in the Masela block
of the Timor Sea to Royal Dutch Shell (RDSa.L).

(Additional reporting by Antoni Slodkowski; Editing by Edwina
Gibbs)