Nikkei dips 0.2 pct as drugs fall, Citi results eyed

(Adds comment, stocks, details)

By Aiko Hayashi

TOKYO, April 18 (Reuters) - Japan's Nikkei stock average edged down 0.2 percent on Friday after a three-day winning streak, as investors moved to the sidelines ahead of earnings results from Citigroup (C.N).

Exporters such as Canon Inc (7751.T) rose on a softer yen and receding pessimism about U.S. corporate profits after Google Inc (GOOG.O) reported solid earnings, while defensive issues such as drugmakers lost favour amid improving investor confidence.

"Investors in Tokyo actually don't want the market to gain too much today because after Citi's earnings the market could rally on short-covering," said Mitsushige Akino, chief fund manager at Ichiyoshi Investment Management Co Ltd.

"While Citi is expected to report bad earnings, it probably has plans to boost its capital, and potential rescue plans might have been discussed at the Group of Seven meeting."

Analysts on average expect Citigroup, the largest U.S. bank, to post a quarterly loss close to $5 billion.

The benchmark Nikkei average .N225 fell 23.09 points to end the morning session at 13,375.21. It gained 3.7 percent over the past three days.

The broader TOPIX index shed 0.2 percent or 3.04 points to 1,290.28.

The dollar was steady from late U.S. trading on Thursday at 102.53 yen JPY=, hovering near a one-month high of 102.95 yen hit in early April.

Investors have been wary of a stronger yen as it decreases the value of Japanese firms' overseas sales when translated back into the currency.

Trade was thin on the Tokyo exchange's first section, with 664 million shares changing hands, compared with last week's morning average of 840 million.

Declining stocks outnumbered advancing ones by nearly 2 to 1.

DRUGS DOWN, EXPORTERS UP

Katsuhiko Kodama, senior strategist at Toyo Securities, said defensive shares such as drugmakers were sold while exporters were bought on improving sentiment in the overall market, with automakers gaining on a softer yen and after their expected poor earnings had been priced in.

Astellas Pharma Inc (4503.T) shed 3.8 percent to 4,040 yen and Daiichi Sankyo Co Ltd (4568.T) gave up 3.2 percent to 2,880 yen.