Nikkei falls 0.4 pct on N.Korea, futures selling

* Nikkei dips after North Korea missile warning

* 200-day moving average at 9,400 marks resistance

* Japan retail investor sentiment best since Sept 2007

By Shinichi Saoshiro

TOKYO, May 26 (Reuters) - Japan's Nikkei average fell 0.4 percent on Tuesday, hurt after North Korea warned of further short-range missile tests and by selling in the futures market after it failed to make a sustained break above a key level the previous day.

Market participants said tech shares such as TDK Corp (6762.T) succumbed to profit-taking amid thin trade, with a number of investors waiting to see how Wall Street will reopen after the U.S. Memorial Day holiday.

But Toyota Motor Corp (7203.T) gained ground after a brokerage lifted its rating, saying the world's biggest automaker would benefit from growing profits for its hybrid vehicles.

Some analysts said the Nikkei retreated after a failed attempt on Monday to make a sustained break above 9,400, about the same as its 200-day moving average.

"The market lacked decisive incentives as Wall Street was closed on Monday. In addition to the North Korea missile news, selling of futures by CTAs led the market lower," said Kazuki Miyazawa, a market analyst at Daiwa Securities SMBC.

"They sold stock futures and bought bond futures after doing the opposite the previous day."

Commodity trading advisers, or CTAs, are trend-following funds that use programmes to trade financial markets.

The benchmark Nikkei .N225 fell 36.19 points to 9,310.81 and at one stage dropped as low as 9,231.93. On Monday, it closed up 1.3 percent, after rising briefly to 9,402.76.

The broader Topix rose 0.1 percent to 883.77 .

On Tuesday, Yonhap news agency quoted a South Korean official as saying that North Korea is ready to fire another short-range missile either on Tuesday or Wednesday, a day after testing a nuclear device and firing three short-range missiles. [ID:nSEO203830].

Although the Nikkei mostly shrugged off North Korea's actions on Monday, the warning of missile tests was enough to encourage investors to take profits.

"This isn't necessarily going to have much of an impact -- after all, the market shrugged off the nuclear test yesterday -- but it's also not particularly encouraging either," said Koichi Ogawa, chief portfolio manager at Daiwa SB Investments.